“Going Private” Transactions
Carlos Hernandez-Artigas
Miami, FL – November 2006
“Now That You Are Public”

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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
Bancolombia
Quilmes
Nortel Inversora
Brasil Telecom
Cervecerias Unidas
Telmex
Bladex
BBVA Banco
Frances
Transportadora Gas
del Sur
Credicorp
Willbros Group
Unibanco
Embratel
Gerdau
Minas
Buenaventura
Amber
Telebras
Ultra
Companhia
Brasileira de
Distribuicao
Braskem
Cemex
Grupo TMM
Madeco
Enersis
Cocal-Cola FEMSA
Casa Saba
Televisa
Radio Centro
Telefonica de
Argentina
IRSA
Metrogas
CANTV
CCM
Telecom Argentina
COPEL
Embotelladora
Andina
CSN
Endesa
Concha y Toro
BBVA Provida
Uniabanco
Santander Chile
D&S
LAN
Quinenco
SQM
Bachoco
Telenorte
Telebras
Telecom de Sao
Paulo
Telemig
TIM
Vivo
FEMSA
Gruma
Early Years as a Public Company
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“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


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Bursting of Tech Bubble Brought Markets Back to Reality
Focus on “Healthy” and “Less Riskier” Assets in the Domestic
Market
Emerging Market Stocks Drifted
Regulation FD

Regulation FD

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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, nonexclusionary 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

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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 / IRMI.com
Sarbanes-Oxley

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
standards.
Enhanced reporting requirements.
Annual Costs of SOX Compliance
Company Size By Annual
Revenues (in Dollars)
Annual Compliance
Costs (in Dollars)
Company Hours Expended on
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 MidCap Issuers,” Marc Mergenstern & Peter Nealis,
2004 / www.sec.gov.
What To Do?


Deregistration
Going Private
Deregistration

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
undervalued.
Benefits to the Issuer

Reduce liability for officers & directors
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Diminish risk of shareholder litigation
Simplify governance
Save on compliance costs, including SOX and D&O coverage
Privacy – less disclosure
Costs to the Issuer
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Costs of Liquidity
Financing Alternatives
Alternative Exchanges
Carlos Hernandez-Artigas
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
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:
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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:
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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).