Following its acquisition of potash assets in Argentina a year ago and a failed attempt to acquire US-based fertilizer specialist Mosaic, Vale has secured 2 sets of Brazil-based downstream fertilizer producers in a deal that may be worth up to $5.6bn. It plans to acquire 100.0% of Bunge’s phosphate unit BPI for $1.65bn and 42.3% of the equity in BM&FBovespa-listed Fosfertil for $2.15bn. However, Vale says it hopes to acquire 100% of Fosfertil’s shares, which could elevate the price to $5.6bn, according to an estimate by Itau. Vale says it has the cash to pay for the purchase. CEO Roger Agnelli says the deals are part of Vale’s the company’s strategy to build its fertilizer business, which will be based in Brazil. The emphasis on domestic location appears to contradict the company’s earlier strategy, which involved a failed move last year to acquire overseas giant Mosaic. That attempt that was derailed by what people close to the process describe as political interference by the government. “We view this deal as positive for Vale because it: i) represents diversification for the company; ii) creates interesting growth opportunities in the fertilizer segment in Brazil; and iii) generates potential synergies between Vale and Bunge’s fertilizer assets,” says Itau. It adds that Vale still needs to decide how it will organize fertilizer assets once the acquisition is concluded. One option is to delist Fosfertil after it gets the shares. Another is to keep it listed and bring all other fertilizer assets under the roof of Fosfertil. Bunge hired Credit Suisse for advice on its sale of assets while Vale apparently did not appoint advisors.
Category: Daily Brief
T&T Cuts Repo Rate
Trinidad & Tobago has cut its repo rate by 25bp to 5.0%, citing still subdued private sector demand that is not likely to strengthen before Q2. “With inflationary pressures currently contained, there is room for monetary policy to continue to stimulate domestic demand in order to lay a firm foundation for resumption in economic growth,” the central bank says. Core inflation, excluding food, was reported at 2.2% year-on-year, down from 7.1% in December 2008. The decline in inflation, the bank says, is mainly attributable the weak domestic demand. JPMorgan sees the bank terminating its easing cycle with an additional 25bp rate cut to 4.75% by end-Q1, but notes that risks are skewed toward additional easing as inflation remains subdued and growth unlikely to resume until Q2.
Brazil Seen Sticking on Rates
Brazil’s central bank is expected to keep its monetary policy rate on hold at 8.75% today. Morgan Stanley says that it is likely to hike this year, but is not in a rush. “Shrinking slack in the economy and rising inflation expectations can eventually force the hand on the monetary authorities,” it says. “However, the bank is likely to wait for a few more months to assess where growth settles after the initial rebound from recession,” it adds. Bulltick meanwhile believes Brazil may tighten 150bp by the end of the year starting in Q2. Standard Chartered predicts a first rate increase of 50bp in March. And Goldman expects Copom to wait until April to initiate the tightening cycle, though it sees a risk of moving in the month before. A central bank survey shows consensus estimates are for the rate to reach 11.25% by year-end.
Chile Seen on Positive Ratings Trajectory
A positive rating action is a possibility for Chile, says Shelly Shetty, senior director of Fitch Ratings. “In the single A category, there is scope for Chile to move up,” Shetty tells LatinFinance. She notes that the sovereign’s debt-to-GDP ratio is low compared to the median of A rated countries. In addition, she says the scope to upgrade the sovereign above its existing A rating depends on president-elect Sebastian Pinera delivering on promises related to reforms in labor, as well as improvements in the country’s education sector. Another country she sees on a positive path is Panama, which she says has manageable financing needs but warns that its debt burden is higher than that of the BBB median. She expects Panama’s GDP to grow 4% in 2010, the highest rating in LatAm for the year. Uruguay, rated BB minus, also has a positive outlook due to its high liquidity. Shetty believes Uruguay will benefit from Brazil’s growth and positive FDI inflows this year. Suriname is also on a positive rating path, adds Shetty.
Panama Remittance Exports Rising
Panama is building on its new role as a net exporter of remittances with a 14% year-on-year increase in money transfers abroad last year. According to statistics from Panama’s ministry of commerce and industry, in 2009 outgoing remittances totaled $230m, up from $201m in 2008. During the same period, the country saw an 11% decrease in incoming remittances. In 2009 they totaled $167m, down from $187m the previous year. Colombia and the US are the main beneficiaries of Panama’s remittance outflows, while the US remains the major source of inflows.
Pemex Appoints New CFO
Mexican oil company Pemex has named Carlos Trevino as its new CFO. Trevino was previously the general director of programming and budgeting at the expenditure office of Mexico’s treasury department. He replaces Esteban Levin, who will become the company’s corporate director of management. The company also created a new department, the corporate direction of information technology and business processes, and appointed Mauricio Galan as director. The appointments are effective February 1.
Japan Scrambles for Raw Materials
The Japan Bank for International Cooperation (JBIC) has signed a $245m loan for Chile’s Minera Los Pelambres to finance expansion. The lender says it is responding to a need from Japanese firms to secure a long-term and stable supply of resources. “In the face of pressure due to a sharp increase in copper concentrate demand in the People’s Republic of China and Republic of India, Japan is increasingly urged to secure copper concentrate,” says JBIC. It adds that it will keep providing financial support to facilitate the development and acquisition of strategically important resources through project structuring and risk-taking functions that draw on its various financial facilities. The borrower aims to boost capacity at the Pelambres copper mine by approximately 370,000 tons of concentrates annually, starting in Q1. Japanese firms will take delivery of approximately 180,000 tons from this increased portion. Los Pelambres is 60% owned by Antofagasta alongside Nippon Mining & Metals Co, Mitsubishi, Marubeni and Mitsui. In May, JBIC provided a loan for the Esperanza project, owned by Antofagasta (70%) and Marubeni (30%).
Credit Agricole Selling Uruguay Bank
French bank Credit Agricole says it has entered into exclusive negotiations to sell Credit Uruguay Banco to Spain’s BBVA. The divestment is part of Credit Agricole’s strategy to focus on banking operations in Europe. The seller does not say how much BBVA is offering for the bank. Credit Agricole has 36 branches in Uruguay and says that at the end of 2009, it held approximately $1.25bn in assets and $1.17bn of liabilities. Besides Uruguay, in LatAm Credit Agricole has operations in Brazil, Argentina, Chile and Venezuela.
Metalfrio Nixes Equity Plan
Brazilian fridge and freezer maker Metalfrio has filed an official statement withdrawing its plans to issue shares in a follow-on of 31m shares that would have raised it BRL341m at Tuesday’s closing price of BRL11.01. The deal was slated to include 17m primary shares and 14m secondary shares. Credit Suisse, Itau BBA and Morgan Stanley have the leads for the pulled deal. In a statement with the CVM, says it will remain focused on developing further synergies from earlier investments, keep an eye out for market opportunities and cash management, obtain new clients and grow its business. It does not suggest an M&A deal is in the works.
Aliansce Tests IPO Waters
Aliansce is set to price an IPO today, marking the first new equity deal of the year and the end of a drawn out filing period for the Brazilian shopping mall manager, which first resubmitted plans to issue last September. The company had initially hoped to issue in 2007 to raise around BRL330m. Today’s offer could generate around BRL1bn if done at the midpoint of the BRL10.00-BRL13.00 range, and all of the greenshoe and hot issue shares are placed. Itau BBA, BTG Pactual, JPMorgan and Bradesco BBI are leading the trade, with pricing expected late Wednesday.