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Provida Plunges in Santiago on MetLife’s $2 Billion Buyout

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Feb. 1 (Bloomberg) -- AFP Provida SA plunged the most in eight months amid concern MetLife Inc.’s $2 billion offer to buy the Chilean pension fund administrator values the company’s shares at a lower price than some investors were expecting.

Provida fell 5.4 percent to 3,283.50 pesos at the close in Santiago, the biggest drop since May. Trading volume was more than six times the full-day average of the past three months. The benchmark Ipsa index gained 0.3 percent.

MetLife, the largest U.S. life insurer, will conduct a public cash tender offer for all of Provida’s outstanding shares as part of a deal it valued at about $2 billion. Provida shareholders should receive dividends representing excess cash and the proceeds from the sale of minority stakes in other businesses, MetLife said in the statement.

The price per Provida share will be U.S. $6.0365, the pension administrator said in a filing with the U.S. Securities and Exchange Commission. That works out to about 2,847.62 pesos per share at the current exchange rate. Shareholders will also a receive dividends totaling an estimated $340 million, according to the filing. That’s an equivalent of $1.026, or 485.60 pesos, for each of the 331.3 million shares.

Shareholders might have expected a better offer after Principal Financial Group Inc. paid a premium when it bought Chilean pension fund AFP Cuprum SA for about $1.5 billion in October, Christopher Disalvatore, an analyst with IM Trust SA, said in an e-mailed response to questions. Santiago-based Provida had a market capitalization of about $2.4 billion earlier this week.

“After the Cuprum premium, shareholders may have been more optimistic than the fundamentals permitted,” Disalvatore wrote.

William Wheeler, president of the Americas at New York-based MetLife, said Provida shareholders will receive a payout that is about equal to the stock’s market value.

“My expectation is that when you take $2.4 billion, the market price, minus the expected cash dividend, you’re going to come very close to the $2 billion we’re paying for the company,” Wheeler said in a telephone interview.

To contact the reporter on this story: Danielle Verbrigghe in New York at dverbrigghe@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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