(Bloomberg) -- Itau Unibanco Holding SA’s bid to increase its stake in its Chilean bank unit to more than two thirds is going down to the wire as minority shareholders balk at the price being offered.
Latin America’s largest private lender has given equity holders in Itau Chile until 5:30 p.m. July 5 to accept a 8,500 peso-per-share offer for the 74.4 million outstanding units. That was a premium of just 7% to the stock’s price when the bid was announced on March 2.
As of the close of trading Tuesday about 4.7 million shares had been offered, according to data from the Santiago Exchange. That would be enough to give Itau holding about 67.8% of the company, just above the two thirds majority it needs to make major changes to the company without the support of other shareholders. However, the offers are non-binding and holders have the right to withdraw them, according to local press reports.
“They’re offering a price way below its book value and that’s a bit absurd,” said Gutenberg Martinez, a partner and investment manager at Quest Capital, which holds Itau Chile shares. “It’s hard to understand Itau’s justification.”
Itau Chile’s current book value per share is 15,540 pesos, according to data compiled by Bloomberg.
Still, if Itau gains the two-thirds required under Chilean law it can take major decisions as dividing or merging the lender, reduce capital, change its domicile or make other structural changes. The bank hasn’t declared a minimum amount of shares to declare the offer a success.
A group of Itau Chile shareholders including MBI Inversiones, Falcom AGF and Consorcio SA have been calling for a higher offer. If Itau is very aggressive in terms of squeezing value from minority holders such as pension funds and insurance companies it could be detrimental for them in the long run as they are the buyers of its bonds and deposits, Renato Sepulveda, chief financial officer of Consorcio said in an interview with Diario Financiero in April. At the time they said it should be at least 20% higher.
Still Itau Unibanco won’t increase the offer, the lender said in an emailed response to questions. “Minority shareholders are free to join the Tender Offer as it is voluntary,” Itau said. Chilean securities law says that for stocks with high trading volumes, known as presencia bursatil, the minimum price in a tender offer has to be the average between four and one months before shareholders vote on the offer. That would have been 8,410 pesos, according to Itau, “and the offer is therefore, fair.”
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