Hedge fund activism has popped up south of the border.
Cartica Capital, a $2 billion Washington, D.C.-based hedge fund, is suing Chilean billionaire Alvara Saieh Bendeck in New York, accusing him of defrauding minority investors.
Cartica claims Saieh has secured a “control premium” for himself in the planned merger of his best asset, CorpBanca, with Brazil's Itau Unibanco.
Cartica, with a 3.22% stake, is one of CorpBanca's largest minority shareholders.
CorpBanca agreed to a stock-for-stock merger with the Brazilian bank in late January. The deal, which includes a $653 million equity infusion and the issuing of 172 million new shares, will make Itau the largest shareholder in CorpBanca with Saieh’s CorpGroup and the remaining minority shareholders controlling less than one third each.
But details of the deal, which were eventually made public, showed Saieh's CorpGroup will get a $960 million credit line, a guaranteed minimum dividend for eight years and the right to appoint the bank's president, among other perks.
Cartica claims Saieh is looking to save his struggling SMU retail and supermarket chain on the back of the successful CorpBanca, a charge CorpBanca denies.
“Given the special benefits received by Mr. Saieh and his affiliates, we reject the Bank’s assertion that the structure of the transaction as a share-for-share merger means that all shareholders will receive the same treatment,” Cartica senior managing director Teresa Barger told Forbes.
“To the contrary, we believe that it is patently evident that the tortured legal structure adopted by Mr. Saieh for the transaction was selected precisely to deprive minority shareholders of the opportunity to have their shares acquired in a tender offer for fair value.”
But CorpBanca CEO Fernando Massu told the magazine the bank “believes that the transaction is beneficial to all shareholders equally, and that the transaction, as a merger, allows all the shareholders to participate in this symmetrically.”