Question regarding potential de-listing, ADRs (PVD)

[rmitz]

I have invested in PVD (A.F.P Provida SA) a couple times, most recently at the March 09 bottom.  It has been an extremely good investment for me and throws off a lot of dividends.  My point here is not to go into the details of whether it's a good investment (hence not in the Ideas section), but over some general issues. 

 

Currently, there is an outstanding tender offer for 100% of shares by Metlife.  They already bought a substantial stake.  I would prefer to keep the investment, and the details of what may happen are rather unclear to me.

 

I believe that I would not be forced to tender my shares under this action given the way it's being done.  However, there are many potential concerns:

 

1) What could happen with the ADRs if there are so few left that the bank holding company becomes uninterested in performing the service?  Are they required to be kept open once they exist?

2) What happens to liquidity?  Will there be enough for even a pink sheets listing? (Speculative--this only relevant because I have had an investment "go dark" before, while the company is still in business.

3) How could Metlife throw off assets while excluding minority shareholders?  I think that if they were to do a typical dividend up to the parent that situation would be obvious, but certainly there are many other situations.  I have seen too many actions where minority shareholders get squeezed recently to feel comfortable about it.  Since it would have different ownership it presumably would not have the dividend requirements it currently does based on the Chilean law.

4) I suppose there might be a second step transaction where my shares get taken out anyway, but presumably that would be at a higher valuation.  There may be requirements in Chile which require this route.

 

Obviously there are more questions based on treatment by different brokers, etc.

 

I guess the overarching question, rather than the specific ones, is what have people's experiences been in similar situations, where a small amount of shares are left held by outsiders? And certainly if anyone knows anything about the Chilean environment specifically that would be helpful.

[Hielko]

I don't know anything about this specific case, but in a lot of countries it's possible to buy out minority shareholders at the same price if you are able to acquire 90/95% of the stock. If this is the case you can usually find it in the tender offer documents.

[rmitz]

I don't know anything about this specific case, but in a lot of countries it's possible to buy out minority shareholders at the same price if you are able to acquire 90/95% of the stock. If this is the case you can usually find it in the tender offer documents.

 

I had remembered that the tender offer was official, but it wasn't coming up in my EDGAR searches; I just found it and it looks like there's a ton of info in there that will answer parts of these questions.  I'll update when I get a chance.

[Chris DeMuth Jr]

I own a decent amount of PVD and read this in their tender offer docs:

 

"Will the Offers be followed by a squeeze-out of minority holders of Common Shares and ADSs who have not tendered their Common Shares or ADSs?

 

No. Chilean law only permits the squeeze-out of minority security holders if the subject company’s bylaws expressly allow a squeeze-out, and then only with respect to such security holders that obtained their securities in the subject company after such bylaws were adopted. Provida’s bylaws do not allow an acquiring company to squeeze out minority holders of Common Shares or ADSs. Therefore, we do not expect to squeeze out the remaining holders of Common Shares or ADSs after consummation of the Offers. However, if a squeeze-out right becomes available in the future, we reserve the right to exercise it to the fullest extent permitted by law."

[rmitz]

This is the high level section which covers the essence.

 

http://www.sec.gov/Archives/edgar/data/1003381/000119312513350872/d570656dex99a1.htm#rom570656_3

 

Essentially, they will be trying to go dark and delist.  There's no squeeze out, though they can extend the offer.  I will keep reading the details but it certainly seems that as a small shareholder the best move is to get out of the way, sadly.

[Packer16]

Net Servicos may provide an example as 97.6% of the preferred shares and 91.9% of the common shares were acquired by Telemex in 2011 and the shares still trade.  The ADR is under the symbol NETC.  I am not a securities expert but there may be some difference between Brazil and Chile.

 

Packer