Venezuela Moves to Buy Verizon Stake
Monday, February 12, 2007; 10:46 PM
CARACAS, Venezuela -- Venezuela has signed a preliminary agreement to purchase Verizon Communications Inc.'s stake in the country's largest telecommunications company, the latest move by President Hugo Chavez toward nationalizing strategic sectors of the economy.
Telecommunications Minister Jesse Chacon said late Monday the government will pay $572 million for Verizon's 28.5 percent stake in Compania Anonima Nacional Telefonos de Venezuela, or CANTV, which Chavez has accused of spying on him at the bidding of the United States.
Calling the agreement "transparent," Chacon said it "begins the process of nationalization of one of the most strategic companies for the country's development." He spoke to reporters after signing the memorandum of understanding with John Diercksen, New York-based Verizon's executive vice president for strategy, development and planning.
The offer amounts to $17.85 per CANTV American Depository Receipt traded on the New York Stock Exchange. CANTV's ADRs closed up 16 cents, or 1 percent, to $16.08 Monday before gaining 47 cents to $16.55 in after-hours trading.
Chacon said the price was "worked on and discussed with the company."
Diercksen said Verizon was pleased to have completed the negotiation quickly and to have given shareholders the opportunity to sell their interests in CANTV.
While the sale price is below the $676 million that Mexican billionaire Carlos Slim offered for Verizon's stake last year, analysts said the deal still could turn out to be a reasonable one for the U.S. company.
Officials did not say whether Verizon will receive its yearly dividend payment from CANTV as part of the deal _ a condition that was included in a separate buyout agreement last week between the government and U.S.-based AES Corp. for Venezuela's leading electricity company.
If so, that could bring the final sale price close to what the market had been expecting, said Luis Gustavo Richard, an analyst with local brokerage InterAcciones Casa de Bolsa CA.
Noting that the negotiation was completed just over a month after Chavez announced the nationalization, Richard said the deal "had to be pretty good for Verizon, otherwise it could have dragged its feet a little more."
"Verizon obtained sufficient benefits during its operation of the company. Nobody is coming out of this losing," he added.
The deal leaves the government with 35 percent control of CANTV, including the 6.5 percent stake it already owned. Remaining shareholders in the company include Spain's Telefonica, public stockholders, and employees and retirees.
That gives Chavez operative control of a company that he accused last month of spying on him.
At a summit of South American leaders Jan. 19, he said CANTV was controlled by "North American capital" and accused the company of recording his conversations at the bidding of the "empire" _ a term he uses frequently to refer to Washington. CANTV denied the accusation.
The deal with Verizon is the second in a series of takeovers announced by Chavez's leftist government in the electricity, telecommunications, natural gas and oil sectors in his bid to transform Venezuela into a socialist state.
The nationalizations have sparked fears that Chavez could mimic expropriations carried out by his mentor Fidel Castro during Cuba's communist revolution.
But some investors were encouraged that Chavez's administration plans to fairly compensate companies it takes over, after the government signed a $739 million agreement last week to buy out Electricidad de Caracas from Arlington, Va.-based AES in a deal that analysts said was reasonable.
CANTV, a former state company, was privatized in 1991. The company has 13,000 employees, 3.25 million fixed-line customers, 6.76 million cellular customers and 592,000 Internet subscribers.