Venezuelan President Hugo Chavez just stepped on the wrong peoples’ wallets with his announced nationalizations of his country’s telecommunications and electricity companies. He called the move a strategic priority or necessity.
The nationalization appeared likely to affect Electricidad de Caracas, owned by Arlington, Virginia-based AES Corp., and C.A. Nacional Telefonos de Venezuela, known as CANTV, the country's largest publicly traded company.
AES Corporation’s offices are in the Virginia suburbs of Washington, DC. On the board sits Richard Darman and Charles Rossotti of The Carlyle Group fame. While takeovers are their firm’s specialty, my guess is they would prefer not to have the Venezuelan government take over part of their firm. How much will it impact the value of Mr. Darman’s and Rossotti’s stock holdings, 721,289 and 176,563 shares beneficially owned respectively? That remains to be seen.
Chairman Emeritus of Carlyle is an ex-Defense Department Chief, Frank Carlucci and the investment house shares a Pennsylvania Avenue address with President Bush. Current Defense Chief Robert Gates just finished a stint as Board Chair for Fidelity Management who happens to own nearly 55 million shares of AES.
At $21 a share Mr. Darman controls $15.1 million, Rossotti $3.7 million and Fidelity Management $1.1 billion in AES stock. However the investment firm with most exposure is Legg Mason based in nearby Baltimore, MD with almost 130 million shares, nearly 20% of the company. How did the other firm Chavi Boy wants to “take private by the public” do? American Depository receipts of telephone company CANTV were hammered by the announcement.
After Chavez's announcement on Monday, American Depositary Receipts of CANTV immediately plunged 14.2 percent on the New York Stock Exchange to $16.84 before the exchange halted trading. An NYSE spokesman said it was unknown when trading might resume for CANTV, the only Venezuelan company listed on the Big Board.
Investors with sizable holdings in CANTV's ADRs include some well-known names on Wall Street, including Deutsche Bank Securities Inc., UBS Securities LLC and Morgan Stanley & Co. But the biggest shareholder, according to Thomson Financial, appears to be Brandes Investment Partners LP, an investment advisory company in California. Also holding a noteworthy stake is Julius Baer Investment Management LLC, a Swiss investment manager.
My guess is the powers that be have something nefarious in store for Hugo Chavez. What it is and how it’s delivered, I have no idea. I just know they don’t like to get taken in a deal…
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