(Adds CorpBanca comments in paragraphs 3-6)
SAO PAULO, April 1 U.S. investment firm Cartica
Management LLC filed a lawsuit in New York on Tuesday against
Chilean bank CorpBanca SA, its controlling
shareholder, Álvaro Saieh, and his investment holding company
over a plan to merge with Brazil's Itaú Unibanco Holding
Cartica asked a court in the Southern District of New York
to declare the defendants "in violation of anti-fraud provisions
and disclosure requirements of the U.S. Securities Exchange Act
of 1934, and to enjoin the closing of the Banco Itaú
Chile-CorpBanca combination," according to a statement.
Washington, D.C.-based Cartica, which oversees about $2
billion in assets, owns about 3.2 percent of CorpBanca's common
shares through separate investment vehicles. In a statement,
CorpBanca Chief Executive Officer Fernando Massú said Cartica's
criticism of the merger "lacks basis" and will "defend our point
of view in the right place."
The fund alleges the deal with Itaú, Latin
America's biggest bank by market value, undervalued CorpBanca's
shares and gave special benefits to Saieh, a Chilean
billionaire, and his company CorpGroup.
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 underlines the difficulties facing
the deal. Recent pledges by Massú to disclose more information
on the merger did little to appease Cartica.
"This attempt to rob minority shareholders has gone on long
enough," Teresa Barger, Cartica's managing director, said in the
statement. "We have brought the fraudulent acts of Álvaro Saieh,
CorpGroup and CorpBanca before a federal court because they,
along with Itaú, have so far failed to take advantage of the
opportunity to voluntarily call off this disastrous deal."
According to Massú, Cartica's goal is to prevent a
shareholders' meeting on the deal from taking place. The
executive also said that the fund's tactics, which include
ignoring the jurisdiction of Chilean courts over the deal,
hampers the merger and the bank and shareholders as a whole.
CorpBanca shares gained 1.4 percent to close at 6.54 Chilean
pesos in Santiago. The shares are up about 7 percent since Jan.
29, when the deal was announced. The preferred shares of Itaú
were up 0.8 percent.
CorpBanca representatives did not have any immediate
comment. Itaú reiterated that the deal followed the highest
standards of corporate governance. Efforts to get a comment from
Saieh and CorpGroup were unsuccessful.
According to Berger, the lawsuit also intends to hold
CorpBanca directors, including Massú and Chief Financial Officer
Eugenio Gigogne, "liable for the harm they have caused and will
cause the minority shareholders."
The combined company would not only give Itaú an important
foothold in retail banking in Chile, but also provide a way to
grow in Colombia, South America's fastest-growing economy last
year. Itaú is contending with slowing economic growth and rising
household debt in Brazil, where it trails state-run lender Banco
do Brasil SA.
Itaú CorpBanca, as the venture will be known, will have a
market value of $8 billion, $44 billion in assets, a $33 billion
loan book, about 10,000 employees and 390 branches, executives
said in January.
In its statement, Cartica alleged that Saieh "used fraud to
extract a control share premium for his majority stake in
CorpBanca," accumulating a number of short- and long-term
benefits that came at the expense of minority shareholders.
Saieh began putting parts of CorpGroup up for sale last year
to raise cash after his retail holding company SMU, which owns
supermarket chain Unimarc, disclosed accounting errors, raising
its liabilities and leading to a breach of debt covenants. He
also controls Chilean daily newspaper La Tercera.
Late last year, Saieh, a Chilean of Palestinian ancestry,
began talks with Itaú to pursue a merger, an outright sale or
the creation of a structure allowing him to remain a relevant
shareholder in CorpBanca, sources told Reuters in December.
"As part of this fraudulent scheme, Saieh and the other
defendants also failed to file any disclosures regarding the
sale that are required of major company investors effecting a
change in control," the Cartica statement said.
Some of those benefits included proceeds from the sale of
his shares in the Colombian unit of CorpBanca, a $950 million
loan extended by Itaú and backed by CorpBanca shares, call
options that bear no downside risk, and the chance to share in
future Itaú Unibanco business opportunities in certain Latin
American countries, Cartica added.
(Reporting by Guillermo Parra-Bernal; Additional reporting by
Felipe Iturrieta in Santiago; Editing by Franklin Paul, Andre
Grenon and Bernard Orr)