Category: Corporate & Sovereign Strategy

Vale is planning to spin off and IPO its fertilizer business, according to wire and local news reports citing remarks from CEO Roger Agnelli. The miner spent $4.59bn in January to buy a controlling stake of fertilizer maker Fosfertil. It could sell shares in the new unit, to be called Vale Fertilizantes, as early as the end of the year, Agnelli says. Vale also plans an expansion of the Bayovar phosphate mine in Peru along with partners Mosaic and Mitsui, and may build a plant to process the mineral into fertilizer.

US-based Darby Overseas is working on establishing new country-specific mezzanine funds for LatAm, CEO Richard Frank tells LatinFinance. “A Colombian fund is expected to close soon that will provide both PE and mezzanine financing in the infrastructure space,” says Frank. “We are also looking at Brazil and Mexico to set up more country-specific funds,” he adds. On average, Darby raises between $250m-$300m for its mezzanine and PE funds. Darby introduced mezzanine financing to LatAm about a decade ago, Frank says. The shop has 3 mezzanine funds for LatAm and 6 global funds. “Out of the $1.3bn we have for EM mezzanine finance, about half is focused on LatAm,” he says. Frank adds that the funds offer returns in the high teens and low 20s over an average of 6 years. Darby’s original mezzanine fund, DLAMF I, is down to its last 2 investments, 1 in Colombia and the other in Mexico, both of which are in a sale process. The fund closed at $196m in 2008. Frank explains that Darby began offering mezzanine funding because it often found excellent companies whose owners do not want dilution or to give up control. However, they do want risk capital to be able to grow. “With mezzanine financing, they can get risk capital for expansion without giving up a huge ownership stake,” he says. In almost every case, Darby takes a quasi-equity stake of between 5%-15%, investing between $15m-$30m on average, says Frank.

Brazil Pharma, the retail pharmaceutical arm of BTG Pactual, is in talks to acquire equity stakes in 2 more Brazilian pharmacy chains, CEO Andre Sa tells LatinFinance. Sa was speaking just a day after the company announced it was acquiring a “co-controlling stake” in Rosario Distrital, whose sales totaled BRL290m in 2009. In the next 18 months Brazil Pharma plans to invest up to $500m, he says, without disclosing how much it paid for Rosario Distrital. “If we do invest in these other 2 chains, they will remain separate from Rosario Distrital,” Sa explains, adding that the deals should be closing by the end of the year. Brazil Pharma’s investment in Rosario Distrital, which is said to give it a 40% stake in the chain, will allow the chain to open 30 stores per year during the next 3 years. It currently has 80. “There are 2 types of drug stores in Brazil: one type serves the high-income population and sells brand-name drugs while the other, which caters to the middle and low-income population, sells generic drugs. We will focus on the latter,” Sa says.

Wilson Brumer, CEO of Brazilian Steelmaker Usiminas, see little room for M&A in the Brazilian steel market, given the profile of controlling shareholders at the major players, according to a report from BTG Pactual. “In his view, Nippon is not a seller of its Usiminas stake, and even if 1 of the 2 other shareholders decide to leave (Votorantim or Camargo), they have tag along rights over one another, and it is unlikely that the structure changes materially,” says BTG. However, the shop adds that Brumer could be interested in M&A with Votorantim long steel (Barra Mansa). BTG notes that Usiminas may look to acquire assets in distribution in Brazil and abroad. The steelmaker is still studying an ADR listing, but no decision has been taken yet. “It would be a positive move for the company, but not enough to justify a reduction in its discount to peers, as the dual share class structure is unlikely to change, and the strategic issues remain,” BTG says. The shop is positive on Usiminas stock for the short term. However, over the long term it sees a need to invest and notes market share and margin loss risk, as well as backdated volume growth in iron ore. It notes a preference for rival Gerdau, which has superior growth prospects, and better market position.