RIO DE JANEIRO — Brazil's largest pension fund plans to challenge, before the country's securities regulator, the terms by which Belgium's Interbrew S.A. has agreed to acquire Brazil's Cia de Bebidas das Americas, known as AmBev.
The deal, valued at $11.5 billion, and announced in early March, would create a global powerhouse with combined sales of $11.9 billion and a 14% global market share. The acquisition would make Interbrew the world's largest brewer in terms of liters brewed.
Under the terms of the complex stock swap, Interbrew would get a 52%.8 common share (22% total share) stake in AmBev, and AmBev would get Interbrew's 70% stake in its North American unit, Labatt, and its 30% stake in Mexican brewer Femsa Cerveza.
But the $20 billion pension fund of Banco do Brasil, Brazil's largest bank, issued a terse statement saying it would challenge the deal "to defend the assets of its participants." The pension fund — the Caixa de Previd%EA;ncia dos Funcionarios do Banco do Brasil, known as Previ — holds 14.7% of the preferred shares in AmBev.
A Previ official said the pension fund plans to challenge the deal before the Comissao de Valores Mobiliarios, Brazil's security regulator.
"Previ is going to argue before the CVM that since the AmBev preferred share price dropped sharply since the deal was announced (30% as of March 23), the acquisition has caused financial harm to Previ and its participants," said the official, who asked not to be identified. "Previ will also argue that the value of Interbrew's Labatt brand has been overvalued and that AmBev might not be able to buy Interbrew's 30% stake in Femsa because Interbrew's partners in Femsa have first-refusal rights to do so."
Previ , which is the only minority preferred-shareholder known to be challenging the deal, doesn't plan to stop even if the terms of the deal change, because the financial harm done to Previ and others minority shareholders can't be undone, said the Previ official. He added that while Previ hadn't set a date for taking its case to the CVM, it could do so in April.
The corporate governance movement is relatively new in Brazil. It began three years ago when the Sao Paulo stock market, the Bovespa, in conjunction with the CVM, began ranking listed companies in three corporate-governance categories, based on how transparent the company was and how well its management protected shareholder interests.
"Corporate governance has had mixed results here," said Lauro Ara%FA;jo, head of investment consulting at the Sao Paulo office of Mercer Investment Consulting. "Some companies are becoming more transparent to get a higher-category, corporate-governance Bovespa ranking and others aren't because it is expensive to comply with the rules needed to increase a company's transparency and get a good ranking. Smaller companies prefer to delist rather than pay that price."
He added the increased transparency hasn't added value and led to higher stock prices, as listed companies had hoped.
"Previ's challenging the Interbrew/
AmBev deal before the CVM is healthy because it keeps controlling shareholders accountable," he said.