Since Argentina’s Cablevision Holdings announced plans June 21 to buy back shares of Telecom Argentina as part of an acquisition, the peso has tumbled more than 30 percent.
The stock is up 16 percent from the initial 110.85 pesos per share — but with the currency weakening, the initial value of the offering in U.S. dollars has gone from $4.03 on June 21 to $2.79 Wednesday. A group of investors is asking the securities regulator, which has to approve the pricing, to accept a higher rate from the company to compensate for the slump.
For the company, every day that passes represents a cheaper buy-back in dollar terms. It has a bridge loan ready to be structured with banks including HSBC and Citi, according to people with knowledge of the matter.
“In these offerings, the minority investor is always at the mercy of the results of talks it doesn’t participate in, and is often hurt by that — the CNV should keep in mind the minority investors,” said Fernando Camusso, director of investment firm Rafaela Capital. “The macro imbalances are watering down the offering price.”
It’s one more afflicted transaction from a spiraling peso, caught off guard by an emerging markets selloff and rising borrowing costs that prompted the government to sign a record $50 billion credit line with the International Monetary Fund. Just months after MSCI Inc. upgraded Argentina to emerging market status, the local market has been thrown into disarray with new share sales shelved and many other capital markets deals on holdto see where the peso will settle.
The tender is a mandatory step as part of a merger of Cablevision and Telecom Argentina to create a combined company that will offer mobile service, fixed-line phone, cable television and internet access. Argentina’s telecommunications regulator approved the merger Dec. 21.
“A price agreement in pesos in an inflationary context and a weakening peso favors the buyer and hurts the seller,” said Juan Cruz Lekovic, an analyst at Buenos Aires-based consulting firm Delphos Investment. A June report by Delphos noted that the way Cablevision had calculated its 110.85 peso offer was likely to be “polemic” for being in favor of the company.
Local shares of Telecom gained as much as 4 percent and New York-traded shares of the company gained as much as 3.2 percent.
Previous tender offers during Macri’s administration have been denominated in hard currency, including a tender offer for Telecom shares launched when Fintech Advisory acquired a majority stake, and most recently when TGLT SA bought a majority stake of construction company Caputo SA. But because this is the first tender offer to be launched since a new capital markets law was passed in May, previous precedents may not apply, fueling the delay, according to people with knowledge of the matter.
Cablevision spokesman Agustin Medina Manson declined to comment. A CNV spokesperson declined to comment on the process but said that it hasn’t been finalized yet. The role of the CNV is to guarantee a fair price based on the parameters set by the law, but the regulator does not establish the price in a mandatory tender offer, the CNV added.
Until then, investors continue to wait.
“It’s striking that so much time has passed with radio silence,” Camusso said. “There’s a large question mark in the market as to what will happen.”