Venezuela took more steps toward nationalizing sectors the government deems strategic, signing deals to buy Verizon Communications' stake in the country's largest telecommunications company and CMS Energy's stake in a local power company.
Energy Minister Rafael Ramirez and Joseph Tomasik, a vice president for CMS , signed a preliminary agreement Tuesday for the state-run oil company PDVSA to buy the Michigan company's 70% stake in Seneca, a small power supplier serving eastern Venezuela, for $105 million.
Late Monday, Telecommunications Minister Jesse Chacon said the government will pay $572 million for Verizon's 28.5% stake in Compania Anonima Nacional Telefonos de Venezuela, or CANTV, which President Hugo Chavez has accused of spying on him at the bidding of the United States.
While the sale price is below the $676 million that Mexican billionaire Carlos Slim offered for Verizon's stake last year, analysts said the deal still could turn out to be a reasonable one for the U.S. company.
The deal values CANTV's American Depository Receipt at $17.85 a share. Those ADRs shot 7.7% higher on the New York Stock Exchange, rising $1.24 to $17.32 in Tuesday's midday trading. Verizon shares rose on the NYSE.
Chacon said the price was "worked on and discussed with the company." Calling the Verizon deal "transparent," Chacon said it "begins the process of nationalization of one of the most strategic companies for the country's development." He spoke to reporters late Monday after signing the memorandum of understanding with John Diercksen, New York-based Verizon's executive vice president for strategy, development and planning.
Diercksen said Verizon was pleased to have completed the negotiation quickly and to have given shareholders the opportunity to sell their interests in CANTV.
Officials did not say whether Verizon will receive its yearly dividend payment from CANTV as part of the deal. Such a condition was included in a separate buyout agreement last week between the government and U.S.-based AES Corp. . involving Venezuela's leading electricity company.
If so, that could bring the final sale price close to what the market had been expecting, said Luis Gustavo Richard, an analyst with local brokerage InterAcciones Casa de Bolsa.
Noting that the negotiation was completed just over a month after Chavez announced the nationalization, Richard said the deal "had to be pretty good for Verizon, otherwise it could have dragged its feet a little more."
"Verizon obtained sufficient benefits during its operation of the company. Nobody is coming out of this losing," he added.
The deal leaves the government with 35% control of CANTV, including the 6.5% stake it already owned. Remaining shareholders in the company include Spain's Telefonica, public stockholders, and employees and retirees.
That gives Chavez operative control of a company that he accused last month of spying on him.
At a summit of South American leaders Jan. 19, he said CANTV was controlled by "North American capital" and accused the company of recording his conversations at the bidding of the "empire" -- a term he uses frequently to refer to Washington. CANTV denied the accusation.
The deal with Verizon is the second in a series of takeovers announced by Chavez's leftist government in the electricity, telecommunications, natural gas and oil sectors in his bid to transform Venezuela into a socialist state.
The nationalizations have sparked fears that Chavez could mimic expropriations carried out by his mentor Fidel Castro during Cuba's communist revolution.
But some investors were encouraged that Chavez's administration plans to fairly compensate companies it takes over, after the government signed a $739 million agreement last week to buy out Electricidad de Caracas from Arlington, Va.-based AES in a deal that analysts said was reasonable.
CANTV, a former state company, was privatized in 1991. The company has 13,000 employees, 3.25 million fixed-line customers, 6.76 million cellular customers and 592,000 Internet subscribers.
The company announced Tuesday that CANTV president Gustavo Roosen has resigned "to facilitate a quick transition that guarantees smooth operations at the company." Vicente Llatas, who has served as the CANTV's vice president since 1998, will replace Roosen.