Category: Brazil

Argentina’s Ternium benefits from its exit from Venezuela and may be looking to invest in Brazil, according to UBS Pactual, which rated the stock a buy. The shop notes a strong Q2 and expects the sale of Sidor to be followed by new investments, with talks of new mill in Brazil. Without Sidor, UBS sees Ternium trading at an attractive 3.7x EV/EBITDA for 08E, which it says is a significant 30% discount to LatAm peers. Ternium Q2 net profit was almost 60% higher.

Mexican manganese and ferroalloys producer Compania Minera Autlan is heard garnering interest from a handful of bidders, including Brazilian mining giant Vale. Vale – whose recent manganese sales hit a record – is understood to be looking at Autlan as prices for its main product hit historic highs. Autlan, which went onto the block earlier this year, has a market cap of $1.96bn and trades at a price to earnings ratio of 19.4x, according to Economatica. If sold to a strategic buyer, the asset could fetch a premium of 20% or more, taking its potential price tag above $2.35bn, says a Brazil-based mining analyst who asks not to be identified. “I don’t think it would make sense for Vale to acquire Autlan,” says Raphael Biderman, a natural resources analyst at BBI, remarking on the low grade of manganese found in the company’s mines. A handful of other steel and mining concerns are nonetheless understood to be studying the integrated operation. Autlan’s executives are said to be targeting a sale by October. Vale recently raised $12bn in a record equity follow-on whose proceeds are destined for capex and M&A. Autlan stock soared earlier this year amid speculation of a sale but saw a sharp correction in July. It closed yesterday’s session at MXP73.47, some 22% off of the July 21 high. Autlan, part of Grupo Ferro Minero, hired Lehman to advise it on a sale. Autlan did not return repeated calls seeking comment. A Vale spokesman declines to comment on M&A plans.

Evercore Partners, the New York-based boutique investment bank, has teamed up with G5 Advisors to advise on cross-border deals for Brazilian firms. Evercore will work with the Sao Paulo-based investment banking boutique and investment management firm on strategic cross-border M&A and related transactions between Brazilian companies and entities located outside South America. They may also team up for deals involving companies in other South American countries, says Evercore. “Evercore’s strategic alliance with G5 Advisors is another step in the globalization of our firm, enabling us to expand our presence in South America and provide superior advice and execution for our clients,” says Roger Altman, chairman and CEO of Evercore. “Brazil, Latin America’s largest economy, continues to grow in importance globally.” Corrado Varoli, CEO of G5 Advisors, is a former head of LatAm for Goldman Sachs. Former Petrobras CEO Francisco Gros is also a G5 senior partner. Varoli says the jv will give its clients in Brazil access to Evercore’s global reach and services. “Our two firms are built on the same principle of providing sophisticated, objective advice to our clients and our geographic footprints are complementary,” he adds.

Pimco, the global investment management firm with almost $830bn in assets under management, takes cover from the global markets storm in Brazil. “Concentrate investments in the economies with credible policy anchors and balance sheets strong enough to help them weather the storm,” EM portfolio manager Michael Gomez tells clients. “At the top of this list is Brazil, with local bonds a particularly attractive long-run investment. Five-year bond yields are close to 14% in Brazil, with inflation running close to 6%. The Central Bank has cemented its credibility by raising rates aggressively to ensure inflation returns to target. This provides investors a unique opportunity to receive high interest rates in investment grade credit, with credible monetary policy, prudent fiscal policy, solid balance of payments dynamics and political calm,” Gomez adds.

S&P has raised Brazilian media conglomerate Globo Comunicacao e Participacoes to BBB- (stable) from BB+ to reflect its increased confidence in the resilience of Globo’s financial performance despite competition. “While Globo’s business profile, with its dependence on advertising revenues and exposure to cost inflation, will be a constraint on the rating going forward, we believe that the company’s financial strength will remain fairly stable in the medium term,” the agency says. Globo is supported by a dominant position in Brazil’s broadcast TV market, featuring programming with considerable levels of self-produced content, a leading position in production of local-language pay-TV content, and strong financial metrics, S&P adds. “These positives help mitigate the risks derived from the concentration of Globo’s revenues and cash generation on TV broadcasting,” the agency says. It also worries about a mismatch between BRL cashflow and USD debt.

Brazil’s SLC Agricola has agreed to a BRL62.3m 2015 loan with Banco do Nordeste do Brasil, a regional development bank. The Brazilian agribusiness company will pay annual interest of 8.50%, though it will receive a discount for full payment by the final maturity date, say company executives. As a result, the all-in rate is effectively 7.23%, they say. The funds will support the development of six farms in the states of Maranhao and Bahia.

Steel processor ArcelorMittal is acquiring 49% of the share capital in Brazilian mining company Mineracao Piramide Participacoes (MPP). MPP’s activities are focused on exploration and development of iron ore and manganese reserves in the region. The price to be paid by ArcelorMittal will be based on the amount of iron ore and manganese reserves in situ assessed according to a code for the reporting of mineral resources and ore reserves of the Australasian joint ore reserves committee, ArcelorMittal adds. Last week, ArcelorMittal announced investment of $1.6bn in long carbon steel operations in Brazil.

Mercedes Benz do Brasil has announced a BRL1.5bn investment over the next three years to revamp its truck, bus and parts production operation in its Sao Bernardo do Campo plant. Daily production of the plant is expected to increase by 25% after the investment. With the investment, the company seeks to meet increasing demand for its products in the local and external market and to make more flexible its production operation in the face of market fluctuations, it adds.

The board of Brazilian car rental agency Localiza has authorized management to raise up to BRL600m through debentures. The issuance will be divided into two series of up to BRL300m each. Localiza did not provide further financial details or an indication of timing. In June, its board authorized raising up to $500m in the international or domestic markets. Last week, Localiza IR director Silvio Guerra told LatinFinance that debt was a better option than equity, given that the company is just 1.3x levered.

Brazilian development bank BNDES has approved a BRL128m 12-year loan for BBE-Brasil Bioenergia. The renewables developer will pay TJLP plus 3.44%. Proceeds fund 80% of a BRL160m plant to extract vegetable oil from soybeans and produce biodiesel in the state of Mato Grosso do Sul.