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Venezuela and Verizon reach deal

February 13, 2007|From Bloomberg News

The Venezuelan government agreed Monday to buy Verizon Communications Inc.'s 28.5% stake in Nacional Telefonos de Venezuela as President Hugo Chavez seeks control over key industries.

The accord calls for the government to pay $572 million, or $17.85 a share, 11% more than the Venezuelan company's closing share price Monday of $16.08. The acquisition price was disclosed after the end of regular stock trading. Nacional Telefonos shares rose as much as 2.9% to $16.55 in after-hours trading.

The deal was signed in Caracas, Venezuela's capital, on state-run television.

"Something is better than nothing," said Chris Armbruster, an analyst at Laguna Beach-based Al Frank Asset Management, which manages $860 million in assets, including Verizon shares. "Being able to monetize it at some level for Verizon means it's still a source of cash on their balance sheet."

The deal followed an agreement last week by Venezuela to pay $739 million for AES Corp.'s 82% stake in Electricidad de Caracas.

Nacional Telefonos' U.S.-traded shares have fallen 18% so far this year, hurt by a statement last month by Chavez indicating that the government wouldn't pay market price for Verizon's stake.

Under Venezuelan law, an offer of this size would trigger a buyout offer for the rest of the shares, said Miguel Octavio, executive director of brokerage BBO Servicios in Caracas.

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