By Guillermo Parra-Bernal and Paritosh Bansal
SAO PAULO/NEW YORK, March 4 An activist U.S.
investor has asked Chilean bank CorpBanca SA to
reconsider its approval of a merger with Brazil's Itaú Unibanco
Holding SA and to launch a new auction, alleging
CorpBanca had sold its minority investors short while benefiting
its key shareholder.
The deal with Itaú, worth about $3.7 billion, undervalued
the bank's shares and gave special benefits to Chilean
billionaire Alvaro Saieh and his investment holding company Corp
Group, hedge fund Cartica Management told the board of CorpBanca
in a letter late on Monday.
Cartica, which manages more than $2 billion and owns 3.2
percent of the Chilean bank, published the letter on its website
on Tuesday, confirming an earlier Reuters report.
Santiago-based CorpBanca did not immediately comment.
Efforts to reach Itaú's press officials were unsuccessful in
Brazil, where many businesses were closed through midday
Wednesday for the Carnival holiday.
Cartica's move, a rare instance of investor activism in the
region, threatens to upset Latin America's largest banking
merger since 2008 and further underpins the difficulties facing
CorpBanca executives have previously defended the deal,
which was announced at the end of January, saying an association
with Itaú would help catapult it into a regional leader.
Itaú was not obliged to launch a tender offer in Chile for
CorpBanca because the deal with CorpBanca did not give the
former more than 50 percent of the Chilean lender, executives
said at the time.
The resulting entity, to be named Itaú CorpBanca, is
expected to have a market value of $8 billion, about 10,000
employees and 390 branches. Under the terms of their deal, Itaú
would have a 33.58 percent stake in CorpBanca through a
shareholder agreement with Corp Group.
Shares of CorpBanca tumbled 13.5 percent on Jan. 29, the day
the deal was announced, reflecting disappointment among
investors that terms were too favorable to Itaú and Saieh, and
there was no buyout offered to its minority shareholders.
The deal gives Itaú an important foothold in retail banking
in Chile and provides a way for it to grow in Colombia - South
America's fastest-growing economy last year - where CorpBanca
also has operations. In Colombia, both banks had to launch a
tender offer to buy out minority shareholders to comply with
local securities rules, since the unit will be fully absorbed by
the combined entity.
Shares of CorpBanca gained 1.1 percent to 6.58 Chilean pesos
in afternoon trading in Santiago. The shares are up 8.4 percent
since the end of January.
Saieh, a Chilean of Palestinian ancestry, began putting
assets in his Corp Group empire on the block last year to raise
cash after his retail holding company SMU, which owns
supermarket chain Unimarc, disclosed accounting errors, raising
its liabilities and leading it to breach debt covenants. He also
controls Chilean daily newspaper La Tercera.
Late last year, Saieh began talks with Itaú to pursue a
merger, an outright sale, or creation of a structure allowing
him to remain a relevant shareholder in CorpBanca, sources told
Reuters in December.
Besides Itaú, Spain's Banco Bilbao Vizcaya Argentaria SA
and Canada's Bank of Nova Scotia were also
interested in the Chilean bank, sources told Reuters at the
time. BBVA, as the Spanish bank is known, came close, but its
proposal was not as attractive as Itaú's, a person with direct
knowledge of the deal told Reuters late in January.
Cartica, which focuses on emerging market stocks, sought to
persuade Saieh in two previous letters that the main argument to
sell the bank should be price, and not the influence he could
exert in the entity stemming from a merger.
In its latest letter, Cartica rebuffed an assertion by the
bank that the all-stock deal with Itaú gave all shareholders
equal treatment, alleging that it believed minority shareholders
were disadvantaged "in return for special benefits accruing to"
Saieh and Corp Group.
These benefits include a $950 million loan from Itaú to Corp
Group and Saieh's right to name the combined entity's chairman,
according to the letter.
"We urge you to take immediate steps to do what is right for
all shareholders and run a full and transparent process to
maximize shareholder value," Cartica's Senior Managing Director
Teresa Barger said in the letter.
Cartica, which was founded in 2008, tries to influence
managements and boards by engaging with them behind the scenes.
The fund has a portfolio of about 15 to 20 stocks, focusing on
companies with market value of less than $5 billion.
The fund's other investments include Cementos Argos SA
in Colombia, International Container
Terminals Services Inc in the Philippines, and Alsea
SAB de CV in Mexico.