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In this article we wish to comment out the different scenarios proposed in the attempted acquisition of Telecom group of companies, Compania Anonima Nacional Telefonos de Venezuela, CANTV, by its likely buyer, the Venezuelan state itself.
Mergers and Acquisitions (M & A) is a branch of corporate finance beyond the limits of this matter and come to be a discipline in itself and science in its own right. Their role and primary objective is to create synergy, ie not only create value for shareholders but for society. The acquisition or merger with “1″ is not only for achieving 1 + 1 = 2, that would be a perfect failure of the management of F & A, but for the achievement and forging of “3″.
In addition to achieving synergy, M & A activity revolves around the game of power is an activity peculiar to capitalism, ie the concentration of capital and power and, therefore, is a highly predatory activity where, consistently, the strongest wins.
In M & As, both activities operate in a very similar spirit, however, there are different legal implications. In an acquisition, the target company ceases to exist and the acquiring legal personality remains intact. In a merger, mix of both operations and creating a new legal personality. Both databases give way to stock the issuance of new shares. With this we have described a merger of equals.
For their part, many mergers acquisitions are presented as though it was technically an acquisition. Why? By the need to soothe and heal rifts in the process of acquisition, which could present the unpleasant connotation of “winner and loser, and nobody wants to appear to be the loser and absorbed, all parties need to show up as winners. It can also be the case of shareholders of the target company that resist purchase to be acquired for reasons of strategic value or type, then we are in the process always disturbing or making compulsory acquisition.
In the case of group company CANTV (VNT), the Venezuelan state through the national government has decided to make a takeover bid (OPA) of the shares class “A” within the consortium VenWorld, formed mainly by Verizon companies (USA) and Telefonica (Spain) which represent approximately 32% of its total share capital of 926,037,385 shares, which gives it management control of the company. However, this bid should not be classified as taking aggressive even as the VenWorld consortium has not ruled in favor or against the acquisition, so we presume that the group is under evaluation and analysis of supply planted.
There is no reason to believe at this moment, the party bringing or purchasing, you may want also to control the entire remaining shareholding base, represented by shares “C” of pensioners from the same company and stock “D” which both are highly atomized in Caracas (common stock) and the NYSE (ADR’s) and maintained primarily by small investors, but we can not rule out that the Venezuelan government is secretly collecting active in both markets most of these actions . For its part, the Venezuelan State already owns approximately 6% of the total share capital “B” purchased in 1991 during the privatization process.
One possible scenario is VenWorld acceptance of the terms of purchase which are not known at this time. If so, everything would be reduced to negotiating a fair price which may fluctuate around some 2,600 million, equivalent to 2,000 million euros as estimated by the students of Business Valuation Metropolitan University of Caracas.
The other possible scenario would be the consortium’s refusal to sell, which would lead to an interesting situation of struggle for control of CANTV group of companies. The Venezuelan government can not afford to fail in its takeover attempt, then this action is part of a process of nationalization of the country’s strategic enterprises, in order to give effect to a centralized planning model. A shot by decree and expropriation is from my point of view a bad strategy. Venezuela has signed international investment agreements and the action violentaría the basis of these agreements create an unfavorable climate for the country.
For its part, the controlling shareholders in countries affected by a compulsory measure, might try to retaliate with which Venezuela maintains active overseas as is the case of Citgo in the U.S.. In addition, CANTV as any corporation of the free world have protection against aggressive shots known as “poison pills” which are actions which directly harm the attraction that it could represent to the buyer. The simplest of these mechanisms is the decree a special cash dividend, payable by the customer, which can substantially increase the purchase price. The Venezuelan government has more than sufficient cash resources to meet such eventualities, but would represent a kind of moral setback or defeat for a rude businessman with many purchases to be made.
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