Wal-Mart’s purchase of Chilean retailer DyS for up to $2.8bn could make it easier for the US firm to enter the Peruvian market, say analysts. “DyS had already opened an office in Peru and had plans to open stores in a smaller format. But with Wal-Mart, it is possible they may decide to open larger format stores,” says Francisco Errandonea, head of equity research at Santander Investments in Chile. He adds that “it is not likely that Wal-Mart would acquire a existing chain in Peru, as the retail market there is not as developed as Chile’s.” A banker away from the deal also says that Wal-Mart is likely to expand into other LatAm markets with the help of DyS, whose controlling family will retain 40% of the company. Errandonea also thinks that Wal-Mart will reduce prices at DyS stores, making competing retailers cut prices too. Barclays Capital and UBS are advising Wal-Mart on the DyS acquisition, while JPMorgan is advising DyS shareholders. Wal-Mart set as a condition the acquisition of at least 50.01% of DyS’s fully-diluted common shares. Wal-Mart already has a presence in Argentina, Brazil, Puerto Rico, Costa Rica, Guatemala Honduras, Mexico and Nicaragua. IM Trust is the dealer-manager for the equity tender offer expected to commence today in the US and Chile, according to Wal-Mart.
Yearly Archives: 2008
Mexico Real Estate Player Trawls for Funds
Miami-based Alsis Funds is looking to raise $100m on top of the $152m in assets it already manages, and foresees significant opportunity in affordable Mexican real estate. “Next year could probably be the best year we’ve ever had in terms of opportunity for the fund,” Alsis Funds managing partner Alfonso Montiel tells LatinFinance. The fund is marketing to US funds of funds seeking private equity type investment, as well as ultra high net worth individuals. The lock up is 7 years and some participants are first-time investors in LatAm. Montiel notes decent appetite from those investor bases, while also seeing reduced demand from pension funds. “A lot of them are reassessing their strategies, I think it’s going to be a difficult year for raising pension fund money,” he adds. The investor notes especially attractive targets in Mexico. “While you are still not seeing the kinds of bargains you see in the US in a similar asset class, because firstly there seems to be a lag, and secondly the economy is sound in Mexico – people are paying their mortgages,” adds Montiel. According to the investor, the fund is now being shown a lot more deals, allowing it to be increasingly selective. “The traditional players are not participating . . . funds like ourselves now get to see a dealflow that was unthinkable a year ago,” says Montiel. Alsis is focused on Mexico, but also interested in Colombia, Peru and Central America. The fund’s objective is to provide risk-adjusted returns through asset-backed structured transactions such as loans and other financial instruments originated in LatAm. Alsis invests in performing and non-performing mortgage loans, consumer loans, micro loans, trade receivables and lease contracts. “People are optimistic about the region, especially as an alternative to everything else that’s happening,” says Montiel. “We’re going to see a slowdown, but competition for investments has decreased significantly.” The Alsis Latin America Fund has $52m of LP equity fro
Market Cheers Wal-Mart Chile Buy
Analysts are upbeat about Wal-Mart’s intentions to acquire Chilean retailer DyS for up to $2.8bn, or 40.8 cents per share in cash. They say the price is attractive for the seller and will allow the US giant to enter other LatAm markets where it is not already present. Francisco Errandonea, head of equity research at Santander Investments in Chile, believes the price is decent for the seller and he is positive the deal will be approved by DyS shareholders and regulators. “Our objective price for DyS is CLP225 per share and the offer is better,” he says. “An acquisition of this size taking place during a global financial crisis reflects positively on Chile’s retail industry and its economy,” says Patricio Hernandez, an analyst at Banchile, who tells LatinFinance that the price offered is “attractive and reasonable.” He had also priced DyS shares at CLP225, or about 35 cents a unit. A Chilean banker away from the transaction says that Wal-Mart’s offer is lower than what retail chain Falabella had bid last year, but that given the global crisis, it is still appropriate. Hernandez says the two deals are not comparable, as Falabella wanted to merge, while Wal-Mart is looking to acquire DyS. Falabella had offered CLP300 per share, or about $3.7bn, but the deal was rejected by Chile’s government early this year. The global economic situation has deteriorated significantly since Falabella’s offer. The Chilean currency has meanwhile weakened, from a 2008 high of CLP430 per US dollar to a current CLP654 per dollar, making the purchase better for Wal-Mart. DyS shares jumped 27.5% on Monday to close at CLP249.
Fitch Affirms Banesco
Fitch says it is affirming Banesco’s long and short term local and foreign currency ratings at B with negative outlook, citing the Venezuelan bank’s low capitalization ratios and the negative effects of government intervention over the bank business. “Profitability has steadily reduced as a consequence of the fierce control of the government over interest rates and fees, mounting inflation and lack of foreign exchange gains,” says Fitch. The agency adds that the bank’s need to build up a stronger loan loss reserve base and the limits imposed by government could result in even lower profitability ratios.
Geo Says Lines Still Open
Mexican housing developer Corporacion Geo says it expects to continue to have access to peso financing and that existing bank lines are solid. “Commercial banks have recently confirmed their commitment to maintain Geo’s current credit lines, and construction loans have also been reconfirmed; GEO therefore has more than enough lines to renew the current bridge loans, if they are needed,” says the company. Geo says it successfully refinanced all debt maturities for 2008, despite “demanding and cautious” credit markets. It adds that a MXP200m December debt placement is confirmation that well-positioned companies still have access to the domestic debt market. “Furthermore, our joint venture (with Prudential and Banorte) reaffirmed their long-term commitment with Geo,” says the borrower.
Cemex to Divest T&T Stake
Mexican cement giant Cemex plans to sell its stake in TCL Group, the holding company for Trinidad Cement Company, say people close to the matter. Cemex owns almost 50m shares in TCL, which last week was trading at TTD4.75. As such, the stake is worth just under $40m, or TTD238m. Cemex is selling some assets with an estimated enterprise value of $2bn as it looks to address a mountain of short term maturities. One corporate credit analyst covering the company says he expects that to yield at best $1.5bn in revenue, considering market conditions for secondary sales. The company is amending covenants on all its loans and extending tenors on close to $4.7bn in loans. “They won’t sell anything that is worth more than $400m because it would be difficult for any acquirer to raise the financing,” says one New York-based analyst covering the credit. Cemex’s LatAm, CentAm and Caribbean assets account for some 15% of the entire company’s Ebitda, according to ING.
Repsol Sells Brazil Stations to AleSat
Brazil’s AleSat has purchased 327 service stations in Brazil from Repsol YPF for BRL130m, according to a spokesman. Bradesco was AleSat’s financial advisor. With this acquisition, AleSat says it enters the Rio Grande do Sul market, where Repsol already had 20 stations, and that it expects to increase the number to 80 by 2012. During the same period, Ale expects to increase the number of stations to 220 from 120 in Sao Paulo and to 140 from 80 in Rio. By 2010, all Repsol stations will be renamed Ale, the company says.
Scotia to Invest in Peru
Scotiabank says it will seek approval from its board during its next shareholder meeting to invest about $100m in Peru for 2009 to strengthen its operations in the country. A source at the bank says the funds will come from dividends that will not be distributed to shareholders. He adds that specific investments have not been agreed upon yet, but that a part of the funds will be used to maintain a healthy level of reserves.
WB Approves $100m Loan for Panama
The World Bank has approved a $100m loan for Panama. The fixed-term loan is repayable in 25 years and has a grace period of 2 years. The transaction “will support institutional reform and key policies for lasting and equitable growth in Panama, such as fiscal discipline consolidation, accountability, and the modernization of public financial management,” says Laura Frigenti, World Bank director for Central America.
Colombia Rate Cut Larger than Expected
Colombia’s central bank has cut its monetary policy rate by 50bp to 9.50%, more than was expected by most economists, who forecast at most a 25bp cut. The central bank says it expects inflation to drop to a range between 4.50% and 5.50% in 2009 from 7.73% registered in November. The central bank is expected to continue cutting rates in 2009 as inflation drops. Barclays economist Jimena Zuniga expects the rate to be eased by 200bp by August. “The central bank is likely to push the policy rate down to about 8.00%-9.00% likely by the end of 1Q2009,” says Goldman Sachs.