Minority stockholders of Telefónica Chile (NYSE: CTC) rejected a bid by controlling shareholder, Spain's Telefónica (NYSE: TEF) to buy 100% of outstanding shares on October 7.
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A proposed change in a company bylaw that limits any single shareholder from owning more than 45% of stock was rejected, effectively ending Telefónica's bid.
Some 55.69% of shareholders voted in favor of changing the statutes. However, 75% of the votes were needed to approve the motion. Approximately 29% of voters were against the change.
The meeting was called after Telefónica announced last month it was offering 1,000 pesos (US$1.83) for each series A share and 900 pesos for series B shares traded on the Santiago stock exchange and in the form of ADSs traded on the NYSE.
However, it was widely expected that the motion would fail as five pension fund managers (AFPs) said they would vote against the initiative last week. The AFPs own 21% of Telefónica Chile.
The meeting was marred by setbacks after AFP Capital called for two recesses totaling 1.5 hours, saying they needed more time to consider their decision.
Telefónica Chile's series A shares rose 7.5% to 975 pesos while trading of CTC was suspended on the Santiago stock exchange because of the vote.
When trading resumed at 15:30 EST, the shares fell 4.1% to 870 pesos - their lowest point in a month - and stayed at that level when the Santiago bourse closed Tuesday (Oct 7).
"To make a US$40bn offer was generous and in line with what analysts said the company was worth in the market. But the shareholders have decided to reject it," said Emilio Gilolmo, Telefónica Chile's chairman told reporters.
"We continue with the responsibility of managing the company and will continue as enthusiastic as ever working for the company and the shareholders," Gilolmo said. "Nothing changes. If it had been accepted, some things would have changed."
Speaking on the sidelines of the vote, minority shareholder Patricio Arrieta, who owns 6,591 shares, told BNamericas he rejected the motion because he was suspicious of Telefónica's motives in buying up the shares that are particularly low in value.
At a time when fixed line voice communications is on the way out, Telefónica probably sees two options, Arrieta said: to pour a lot of money into services such as IPTV to boost competitiveness against triple play provider VTR; or to invest in the short term to increase the company's value and then sell it after a few years.
"It was a good time to buy, shareholders are unhappy and the stock price is low," Arrieta said.
