Argentine company is focus of probe Bunge & Born suspected of insider trading in Procter & Gamble deal

January 09, 1996|By BLOOMBERG BUSINESS NEWS

BUENOS AIRES -- Argentina's National Securities Commission is investigating Bunge & Born SA, one of Argentina's largest holding companies, for insider trading.

The watchdog agency suspects Bunge & Born, its directors and two other companies relied on privileged information to boost their stake in a chemical company just before the company was sold to Procter & Gamble Co. in late 1993.

Bunge & Born bought 2.28 million shares, increasing its stake in Cia Quimica SA to 68 percent from 36 percent. If the firm bought all the shares at 3.9 pesos a share -- the highest price before the transaction was announced -- it would have made about $14 million when it later sold the shares to Procter & Gamble at 10.214 pesos apiece.

The probe is the second case of suspected insider trading to be investigated in Argentina within the past six months. Companies or individuals found guilty of insider trading can be fined as much as three times the benefit obtained from the illegal transaction.

Bunge & Born, which has extensive food processing, chemical, paint and commodity trading operations in Argentina, paid as little as 2.6 pesos ($2.6) and as much as 3.9 pesos for the shares it later sold to Procter & Gamble, said the commission, known as CNV, in a statement.

Bunge & Born denied the purchases constituted insider trading.

"The CNV is mistaken when it presumes Bunge & Born bought the shares with the idea of selling them for a lot more," said Bunge & Born Vice President Salvador Carbo. "The CNV investigation gives us the opportunity to clarify the matter."

Bunge & Born built up its stake in Cia Quimica to ease the sale negotiations, because acquiring companies "usually like to buy as much stock as possible," said Mr. Carbo.

The CNV statement detailed a series of share purchases by Bunge & Born and two companies linked to it, one a Swiss company called Clara SA and the other a Uruguayan company known as Newcas. The purchases took place between September 1992 and October 1993. Bunge & Born acquired 32 percent of the company, while Clara acquired 10 percent and Newcas 3 percent.

The CNV said there were indications of "a close relationship between Clara, Newcas and Bunge." Mr. Carbo said that though Bunge & Born represented the two companies in the merger negotiations and had other business dealings with them, it doesn't own shares in either.

The links between the companies gave rise to suspicions they used "privileged information originating in Bunge, and which should have been withheld, for their own benefit," the CNV said.

Procter & Gamble reached an accord with Bunge & Born to buy 86 percent of Cia Quimica, which comprised shares owned by Bunge & Born, Newcas, Clara and a number of individual investors, in December 1993.

Procter & Gamble later acquired the remaining stock through an offer to minority shareholders at the same price of 10.214 pesos per share.

The price valued Cia Quimica at $71 million.

Cia Quimica's stock exchange listing was subsequently canceled.

A spokesman at Procter & Gamble's headquarters in Cincinnati said he could make no immediate comment on the investigation.

Companies within the Bunge & Born group, which is privately owned, had combined net income of about $70 million pesos on sales of $1.6 billion in 1995, Mr. Carbo said.

Among other companies, Bunge & Born controls Molinos Rio de la Plata SA, Argentina's leading food processing and edible oil company.

The Bunge & Born investigation comes six months after the CNV said it was investigating former officers of biscuit and pasta maker Establecimiento Modelo Terrabusi SA for suspected insider trading ahead of the 1993 sale of the company to RJR Nabisco Inc.

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