Peru's securities regulator SMV has questioned the costs borne by Pacasmayo, concluding that the company's corporate equity is being utilized to finance a private benefit for the controlling shareholder.
Peruvian pension funds are challenging a local billionaire for passing on the costs of selling his controlling stake in the country's second-largest cement maker to shareholders -- including workers' accounts -- rather than paying them himself.
Eduardo Hochschild announced late last year that he was selling his 50.01% stake in Cementos Pacasmayo SA to Holcim AG, the world's largest cement maker, for $550 million. The deal was signed between Hochschild's holding company Inversiones ASPI and Holcim, while Pacasmayo said it had "no part" in the transaction, which has yet to close.
But Peru's four private pension funds, which own 18% of the company, balked when Pacasmayo disclosed in its latest earnings that it spent 78 million soles ($22 million) on the Holcim deal. The vast majority went on to pay bonuses to executives led by Chief Executive Officer Humberto Nadal, while a portion was used to pay advisers on the transaction.
"When the seller is a shareholder, the person who pays the transaction costs are the seller and the buyer, not the underlying company," said Pablo Moreyra, a corporate governance expert. "That's just a basic principle in merger and acquisition transactions."
The dispute is testing the muscle of Peru's pension funds, which control some $30 billion in assets, as well as the might of Peru's securities regulator SMV, which has questioned the costs borne by Pacasmayo.
The cement maker's "corporate equity is being utilized to finance a private benefit for the controlling shareholder," SMV concluded in a filing published this week.
The regulator ordered Pacasmayo to either reverse the expenses and, as a result, increase its 2025 profits, or charge them to Hochschild's holding company. Pacasmayo has protested, saying the SMV has no legal authority to tell a private company what to do with its money.
"It is fundamentally outside the SMV's mandate to intend to intervene in business decisions that correspond exclusively to the company's management bodies," Pacasmayo said in a securities filing, adding that the fees were justified because the transaction "generates long-term value for the firm."
Pacasmayo, where Hochschild remains chair, declined to comment further.
Hochschild is one of Peru's richest billionaires and controls gold and silver producer Hochschild Mining Plc. He's also venturing into rare earths, establishing Aclara Resources Inc., which seeks to refine those minerals in the US with support from the Trump administration.
'Potential Conflict'
Nadal has been Pacasmayo’s CEO since 2011 and also serves on the company’s board. The cement maker listed depositary shares with the New York Stock Exchange a year after he took over the top job.
He is also chief executive of ASPI, Hochschild’s holding company, through which he still controls Pacasmayo until the deal is completed.
“There’s a potential conflict of interest when the CEO of the selling company is the same person as the CEO of the operational company,” Moreyra said, referring to ASPI and Pacasmayo.
The pending deal with Zug, Switzerland-based Holcim was initially discussed in September, according to Pacasmayo’s securities filings. Two months later, the board unanimously agreed that Pacasmayo should pay the transaction costs and executive bonuses if the deal went through, according to minutes published by the cement maker.
The costs are significant and can hurt minority shareholders, the pension funds argue, because they total almost 50% of Pacasmayo’s $46 million of net profits in 2025.
“We are especially worried that the most significant expense is a payment to senior management triggered by a change in control,” Mariano Alvarez de la Torre, CEO of AFP Habitat, one of Peru’s pension funds, said in a letter to Pacasmayo. “It is important to know why a private transaction should trigger benefits paid with Pacasmayo’s resources.”
Pacasmayo has defended the executive bonuses, but declined to give specifics except that they represent “by far, the majority portion” of the expenses. The cement maker also said that Nadal had achieved “outstanding performance” and that other executives received only a “very minor percentage” of the total amount.