Compañía de Telecomunicaciones de Chile S.A. (CTC): Arbitrage Opportunity
U P D A T E
On October 30, CTC shareholders accepted IT’s revised tender offer of 4,400 Chilean pesos ($7.00) per share. This is quite a satisfactory outcome, considering both the substantial decline in global stock markets and the appreciation of the U.S. dollar.
T H E S I S
Inversiones Telefónica (IT) is conducting a tender offer for the American depository receipts of Compañía de Telecomunicaciones de Chile (CTC). Shareholders will receive the dollar equivalent of 4,000 Chilean pesos per share—about US$7.54 at current exchange rates. This is 8% above CTC’s last trade price; the annualized return should approximate 50%.
IT has conditioned the deal on the following terms: (1) there being validly tendered and not withdrawn prior to the expiration date of the Offers a number of Shares (including Shares represented by ADSs) that, together with the Shares already owned by TICSA, would represent at least 75% of the total number of the outstanding Shares (including Shares represented by ADSs) and (2) the shareholders of the Company (the “Shareholders”) approving bylaw amendments that would, among other things, eliminate the restriction currently contained in the Company’s bylaws that limits to 45% the percentage of Shares that may be owned or voted by one Shareholder, directly or through related persons (the “Bylaw Amendments”), by the affirmative vote of holders of at least 75% of the Shares with voting rights, including Shares represented by ADSs, at a special meeting of the Shareholders requested by TICSA (as a Shareholder of the Company) for such purpose (the “Shareholder Meeting”).
