AES faces key vote for $1.06 bln takeover of Gener

Bloomberg

Heather Walsh

December 12, 2000

Santiago, Dec. 12 (Bloomberg) à‚– AES Corp., the top U.S. plant power plant developer, faces a key vote for the success of its $1.06 billion hostile takeover bid of Chilean power company Gener SA as the company expands in Latin America.

Shareholders of Gener will meet at 5 p.m. (3 p.m. New York time) to vote on eliminating a rule that limits any one shareholder’s investment to 20 percent.

Virginia-based AES needs support from 75 percent of Gener shareholders to change the rule and go ahead with its buyout.

“We feel confident that we will get the vote,” said Steven Walsh, vice president of AES division AES Americas. Though “it’s never over until it’s over.”

AES wants to add Chile’s No. 2 power company to a string of acquisitions across the region, including ones in Brazil, Venezuela, and Argentina. The vote may hinge on whether AES wins the backing of Chilean pension funds, which owned almost 31 percent of Gener in September.

Concern that at least one pension fund may vote against the rule change led Gener shares to slip as much as 1.9 percent to 126.5 pesos in Santiago trading, falling for a second day.

“Clearly the price reflects uncertainty about their success at the meeting,” said Arturo Curtze, a trader at AFP Cuprum SA, which manages about $5.7 billion in Chilean retirement money.

Fund AFP Habitat SA may vote against the change to pressure AES to sweeten its offer, Chilean newspaper El Mercurio reported last week. Habitat is concerned that $80 million of convertible bonds that the fund owns in Gener may lose value after the sale, the newspaper said. Habitat owns almost 7 percent of Gener.

AFP Habitat Chief Investment Officer Cristian Rodriguez wasn’t available for comment.

Backfire

Rejecting the rule change could backfire if AES, the sole bidder for Gener, abandons the chase for control of the company.

“I think if we don’t get the 75 percent, we’ll pack our suitcases and go,” Walsh said in a telephone interview.

AES said the Gener purchase would give the company a presence in Chile and also complement its properties in other Latin American countries, such as Colombia, where both Gener and AES own power plants. AES shares fell 0.25 to 50.56.

Maintaining the ownership cap would dissuade any potential rival bidder, said fund manager Felipe Bosselin at Larrain Vial SA, which manages about $110 million, including shares of Gener. The stock also would slump if the bid is blocked, he said.

“It wouldn’t be logical for shareholders to block this,” Bosselin said. “AES should reach its goal.”

AES already has the support of Gener’s biggest shareholder, forestry and energy holding company Copec SA, which owns almost 20 percent.

The U.S. power company struck an agreement last month to sell Gener’s Argentine power plants and a transmission line to France’s Total Fina Elf SA for about $652 million, potentially trimming the price of its purchase.

Until then, Total Fina had been a rival to AES. The French company had proposed spending $810 million to buy Gener’s power plants in Argentina and a 20 percent stake in Gener, a proposal that the company dropped after its agreement with AES.

The AES purchase could get more expensive if the company has to comply with upcoming changes in Chilean securities laws. One law, which could be in place as soon as this month, would make businesses buying more than two-thirds of a company purchase all the remaining shares.

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