Hernandez Artigas-Going Private Transactions

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					“Going Private” Transactions

Carlos Hernandez-Artigas

Miami, FL – November 2006
     “Now That You Are Public”
        During a short period in the 90s, Latin American companies found a
         window of opportunity to list their securities in the U.S., mostly on
         the NYSE.
        The following companies, which represent almost 66% of all Latin
         American companies listed on the NYSE, were listed during the 90s:

1991       1992           1993                1994              1995           1996              1997              1998               1999
 Vitro    Ara Cruz         YPF          Transportadora Gas   Bancolombia      Quilmes       Nortel Inversora   Brasil Telecom   Cervecerias Unidas
Telmex                                        del Sur
           Bladex      BBVA Banco                             Credicorp    Willbros Group      Unibanco           Embratel           Gerdau
                         Frances          Telefonica de
         Grupo TMM                                                            Minas             Amber             Telebras            Ultra
                         Madeco                                            Buenaventura
                                                                                             Companhia            Braskem            Cemex
                         Enersis                                              CANTV          Brasileira de
                                            Metrogas                                         Distribuicao
                     Cocal-Cola FEMSA                                          CCM
                                        Telecom Argentina                                       COPEL
                        Casa Saba
                                                                                                               Telecom de Sao
                                          Embotelladora                                          CSN
                         Televisa                                                                                   Paulo
                       Radio Centro                                                                               Telemig
                                                                                            Santander Chile
                                          Concha y Toro
                                          BBVA Provida
Early Years as a Public Company
   “Honeymoon” Period for Emerging Markets
   ADR Programs Became Popular
   Dual Classes of Stock
   Liquidity
   Privileges of Foreign Private Issuers vs. Domestic Issuers
Replaced and Forgotten
   Bursting of Tech Bubble Brought Markets Back to Reality
   Focus on “Healthy” and “Less Riskier” Assets in the Domestic
   Emerging Market Stocks Drifted
Regulation FD
   Regulation FD
       Requires that when an issuer intentionally discloses material information
        to certain persons, it do so publicly and not selectively. The company
        may make the required disclosure by filing the information with the SEC,
        or by another method intended to reach the public on a broad, non-
        exclusionary basis, such as a press release. When selective disclosure
        of material information is made unintentionally, the company must
        publicly disclose the information promptly thereafter.
   How to comply?
Foreign Issuer vs. Domestic Issuers
   Security Issues Affecting Latin Issuers and their Employees
      Compromising Personal Security
      Disclosure of Salary Information
The Board of Directors
   Training Foreign Directors to Think Like U.S. Directors
   Explanation of Duties of Directors Under U.S. Law
   Director Liability
   D&O Insurance

                                          Source: 2002 Tillinghast-Towers
                                          Perrin /
   Corporate governance reforms such as:
     Enhanced role for audit committees;
     CEO/CFO certifications;
     Disgorgement of CEO/CFO bonuses and trading profits; and
     New SEC powers to bar "unfit" officers and directors.
   New auditor independence restrictions and attorney professional
   Enhanced reporting requirements.
Annual Costs of SOX Compliance

     Company Size By Annual     Annual Compliance             Company Hours Expended on
        Revenues (in Dollars)      Costs (in Dollars)                  Compliance

  24 to 99 million                   740,000                              3,080

  100 to 499 million                 780,000                              5,100

  500 to 999 million                1,000,000                             6,900

                                                  Source: “The Impact of Sarbanes-Oxley on Mid-
                                                  Cap Issuers,” Marc Mergenstern & Peter Nealis,
                                                  2004 /
What To Do?

   Deregistration
   Going Private

   A foreign private issuer may deregister its class of securities by
    certifying that:
        The class of securities is held of record by less than 300 persons
         resident in the U.S.; or
        The class of securities is held of record by less than 500 persons
         resident in the U.S. (where the total assets of the issuer have not
         exceeded a certain amount).
   Effects of deregistration
      Upon filing a certification of Form 15, the issuer’s duty to file any reports
       required under Section 13(a) will be suspended immediately.
      Issuer is no longer subject to the Sarbanes-Oxley Act and SEC
       disclosure rules.
      Issuer is no longer eligible to trade on the OTC Bulletin Board.
Going Private
   Objective of a Going Private Transaction:

        To pay shareholders a fair price for stock that has limited liquidity.

        To redirect business purpose to focus on long-term goals.

        To retrieve a company from an arena where it is overlooked and
Benefits to the Issuer
   Reduce liability for officers & directors
        Diminish risk of shareholder litigation
   Simplify governance
   Save on compliance costs, including SOX and D&O coverage
   Privacy – less disclosure
Costs to the Issuer
   Costs of Liquidity
   Financing Alternatives
   Alternative Exchanges
Carlos Hernandez-Artigas
   Managing Partner of Forrestal Capital, an investment banking and investment
    advisory firm located in Miami, Florida, with vast experience in mergers and
    acquisitions, corporate finance, private equity and asset management services.
    Formed in 2003, the firm provides services to high net worth individuals in the Latin
    American region. Mr. Hernandez-Artigas sits on the board of directors of a number of
    companies in Colombia and Argentina. His area of expertise is general corporate law
    and mergers and acquisitions.
   Prior Experience:
        From 1993 through 2003, he served as General Counsel and Secretary of the Board of
         Directors of Panamerican Beverages, Inc. (“PANAMCO”), the largest Coca-Cola Bottler
         outside the U.S. PANAMCO was a Panamanian company registered with the Comision
         Nacional de Valores de Panama (“CNV”) and listed in the New York Stock Exchange
         (“NYSE”) until it was sold to Coca-Cola FEMSA (“KOF”) in 2003 for $2.6 billion in cash.
        Prior to PANAMCO, he was a foreign associate at Fried, Frank Harris, Schriver and
         Jacobson in New York. He also practiced law in Mexico City and Ciudad Juarez, Mexico.
   Education:
        Universidad Panamericana, School of Law, Mexico City, Mexico in 1987; Master of
         Comparative Jurisprudence from the University of Texas at Austin, School of Law (1988);
         Master in Business Administration from Instituto Panamericano de Alta Direccion de
         Empresa (“IPADE”) in Mexico City (1996).