Tuesday, January 09, 2007

More People Mad about Hugo’s Folly

It turns out even more folks stand to lose financially from Venezuelan President Hugo Chavez’s planned nationalization of his country’s electricity and telecommunications companies.

AES Corporation stands to lose its Venezuelan affiliate, Electricidad de Caracas. The global power company acquired a majority stake in Electricidad via a hostile takeover in 2000.

News revealed Verizon Corporation owns 28.5 percent of Hugo’s planned telecom takeover target, CANTV. A host of investment houses own large chunks of that same company’s American Depository Receipts.

While the Verizon Board has no Directors with Pennsylvania Avenue offices, they do have a number of board members doubly impacted by Hugo’s antics. Sandra Moose also sits on the AES Corp board which stands to lose its Venezuelan electrical company. Walter Shipley serves on the Exxon Mobile board which lost Venezuelan assets when President Chavez conducted an earlier round of nationalization with his country’s energy resources. Sandra has 34,904 stock option shares exercisable within 60 days while Walter’s stand at 55,232. Within two months the two directors will control $3.3 million in Verizon shares.

As mentioned earlier both members could take a hit in their wallet/purse for Hugo Chavez’s actions. Sandra beneficially owns 19,523 shares of AES Corp (worth $410,000) while Walter’s stake in Exxon Mobile amounts to 40,540 shares, valued at almost $3 million.

While Sandra and Walter are likely kind hearted people able to take a financial hit, other investors might not be so charitable? Carlyle Group Executives are used to doing the taking over and they might not take kindly to a hostile acquisition by a government entity. With an ex-Defense Dept. Chief as Chairman Emeritus, what might they ask of the federal government?

How might Verizon react if they don’t get fair value from Hugo for their asset? With over $1 million in campaign donations in the Fall 2006 elections, they should have the ear of many members of Congress. How might the U.S. government react on Verizon’s behalf?

Fidelity owns 55 million shares of Verizon stock worth over $2 billion. Will Fidelity’s ex Board chair, Robert Gates feel the need to help his old company in his new role as Defense Department Chief? Between VZ and AES, Hugo Chavez tampered with over $3.1 billion in FMR holdings. Many a war has been fought for less…

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