Coca-Cola Femsa (KOF) has agreed to pay $689m to buy 51% of Coca-Cola Bottlers Philippines from Coca-Cola, it says, in the Mexican bottler’s first buy outside of LatAm. It enters a market that the company and analysts see as having a similar profile to the LatAm countries where KOF already operates. Analysts find the price to be reasonable, at 13.5x 2012 Ebitda. The multiple of $2.50 per unit case, Banorte says in a note, is in line with the $2.50-$3.00 level the shop would expect. “This multiple compares favorably with the $5.00 multiple the company has paid in its recent Mexican acquisitions,” Banorte says. The annual sales of Coca-Cola Bottlers Philippines is only about 27.5% of KOF’s Mexico operations, Monex says in a note, adding that the Philippine beverage industry should double in the next 10 years. The call and put options KOF retains make the deal even more favorable. It has an option to acquire the remaining 49% of the bottler good for the next seven years, as well as one to sell its stake back to Coca-Cola after six years, both at the same multiple. The deal is all cash, and KOF plans to fund it with $700m in short and medium-term bilateral bank loans, according to Fitch, which considers the debt “manageable.” Officials do not respond to request for additional information on the loans. KOF expects pro-forma net leverage of 0.7x and a coverage ratio of 19.7x, both ensuring continues access to the capital markets. KOF will be managing the day-to-day operations of the business, with Coca-Cola keeping certain rights on the operational business plan. The deal is expected to close in early 2013. Allen & Company and Rothschild were financial advisors to KOF, with Cleary Gottlieb and Salazar Hernandez & Gatmaitan working the legal side. Skadden Arps was counsel to Coca-Cola.
Category: M&A
Alsea Adds to BK Holdings
Mexico’s Alsea has formed a joint venture with Burger King Worldwide into which both parties will place their Burger King restaurants in Mexico. In the deal, Alsea pays an undisclosed sum in exchange for majority control of the JV, made up of 203 restaurants. An Alsea official did not respond to a request for more information, though Alsea states that the deal comes at a 7x EV/Ebidta value. “The transaction is positive for the company and in line with its business strategy,” Monex says in a note, seeing 30% sales growth in 2013, up from 26% this year.
Fibra Uno to Grow
While Macquarie’s IPO may be taking the spotlight this week, the pioneer of the Fibra class, Fibra Uno, is remaining active. The fund controlled by the El-Mann family is planning to buy a 30-property portfolio that should mean a MXP18.4bn ($1.44bn) investment, Fibra Uno says. About 76% is industrial property, with the remainder commercial and office space. Highlighted by the Torre Reforma Latino, the portfolio has 21 properties generating income and 9 in development. The portfolio is estimated to be generating MXP860m annually. Some 46% of the payment will be in shares, 23% in assumed debt and the remainder in funds for construction investments.
Diageo Puts Cap on Tequila Talks
Diageo has pulled out of talks to buy a stake in Mexico’s Jose Cuervo, it says, after the two companies had been discussing price for more than a year. Cuervo, with a value estimated at $3.5bn-3.5bn, has a distribution deal with Diageo due to end in June 2013, leaving the global spirits company without a major tequila brand. Diageo had been expected to take a stake in Cuervo with the possibility of gaining majority control at a later date. Barclays had been advising Curevo and Goldman Sachs working with Diageo.
Interregional Buys Push M&A Volume Past 2011
LatAm’s M&A volume is set to finish this year up from 2011’s total, driven by non-LatAm buyers acquiring in the region, a trend which bankers see getting even stronger in 2013. There has been $163.25bn in announced M&A volume this year through Tuesday from 1,695 transactions, according to Dealogic data, already eclipsing 2011’s full-year total of $158.98bn. This year’s total is boosted by the $20bn sale of 50% of Mexico’s Modelo to AB Inbev, one of several international moves into LatAm by Europeans, Asians, and increasingly, Americans. “We have seen the comeback of the Americans. This year we have seen resurgence in US players interested in Latin America. Corporates in the US have a lot of cash, they are looking for growth, and Latin America is right next door,” Nicolas Aguzin, LatAm CEO at JPMorgan until moving last week to head Asia, tells LatinFinance. JPMorgan looks set to lead the M&A tables this year, booking $55.52bn in volume to date, ahead of Bank of America Merrill Lynch ($51.16bn) and Credit Suisse ($39.29bn). Aguzin notes that an integrated approach to the business – and an ability to offer loans, ECM, and DCM access – will be key in 2013. He expects to see an increasing number of bond takeouts for M&A in the region, such as happened with Cencosud’s $2.6bn purchase of Carrefour’s Colombian assets. Bankers expect regional players such as Cencosud to continue expanding, driving the volume along with foreign entrants and additional European exits. Large transactions are also likely to be a theme. “Big deals are getting done as easily, if not more easily than small deals,” says a head of LatAm M&A. He notes that there have been more than 50 deals this year of $500m-plus, compared to around 40 of $300m-$400m size. This year’s M&A wallet, at $564m, will need a push in the next two weeks to catch the $573m fee pool from 2011. BTG Pactual leads with $104m, followed by Credit Suisse ($70m) and Itau ($46m). JPMorgan is fourth with $42m.
Bunge Unloads Brazil Fertilizer Assets
Bunge has agreed to sell its fertilizer operations in Brazil to Norway’s Yara International for $750m cash, the companies say. The deal is consistent with M&A trends in the region, with one international player selling in Brazil to streamline its operations and another paying a premium for expansion in a high-growth market. “It is somewhat expensive if they are unable to complete the transition Bunge started, but if they are able to complete the process, it doesn’t seem like a high price,” Jeffrey Stafford, analyst at Morningstar, tells LatinFinance. He notes that Bunge had struggled to realize the profit potential from the Brazilian blending and distribution operations following the 2010 sale of Brazilian phosphate mining assets to Vale. Yara, which already operates in eight LatAm countries including Brazil and has prioritized international expansion, says it should see $25m in synergies by 2014 from the addition. Friday’s deal comes at EV/Ebitda of 10x, SEB Enskilda says, a “dilutive” level, that, if the synergies are achieved will appear closer to fair value in the long-run. Bunge and Yara have also agreed to enter into a long-term fertilizer supply agreement. The deal is expected to close in the second half of 2013, and is subject to regulatory approvals. Credit Suisse, Souza Cescon Avedissian Barrieu e Flesch and Shearman & Sterling advised Bunge. Yara did not use external advisors, a spokesman says. US-based Bunge continues its various agribusiness operations in Brazil, and will hold on to one port asset that was part of its fertilizer distribution business. It also operates in Argentina, Colombia, Paraguay, Peru and Uruguay.
Gruma Moves to Block Chico Pardo
Gruma plans to use its right of first refusal to purchase a 23% stake of itself owned by Archer Daniels Midland (ADM) that the US agriculture operator had agreed to sell to ASUR chairman Fernando Chico Pardo, Gruma says. The exact pricing and timing remain unclear, but the move is approved by the Mexican tortilla maker’s board and Gruma is readying financing. In a report, UBS sees the 23% stake fetching at least $380m, and, when stakes in additional subsidiaries are included, the deal could reach $600m. Assuming the raising of $600m in debt to pay for the deal, the likely resulting 3.3x net debt/Ebitda would be “not exorbitant, it does take away some of the flexibility the balance sheet had recently gained,” UBS says. “Although the news reduced the possibility of the company delisting, it could add significant amount of debt only to buy its own shares, rather than for additional investments,” Monex says in a report, calling the move “negative.” ADM had agreed in October to sell the Gruma shares to Chico Pardo, as the American group concentrates on other areas. Bank of America Merrill Lynch is advising ADM.
Abertis Adds in Chile, Launches Brazil Tag-Along
Spain’s Abertis has agreed to buy a set of Chilean road assets from OHL for EUR204m ($268m), and is separately launching a required tag-along offer for all of OHL Brasil along with its partner Brookfield.
In Chile, Abertis has agreed to acquire 100% of the Sociedad Concesionaria Autopista de Los Andes and Operadora de Infraestructuras de Transportes Limitada, as well as 41.41% of Infraestructura Dos Mil, the company holding the shares of both Sociedad Concesionaria Autopista del Sol and Sociedad Concesionaria Autopista Los Libertadores. Abertis is going to finance the purchase with loans in Chile, it says. From 2013, Abertis expects an annual impact of around EUR60m on its Ebitda. The transaction is subject to regulatory approval and approval of those insuring financing attached to Autopista los Andes, which Abertis expects by the end of December. Separately, Abertis and Brookfield plan to launch a tag-along bid for the 40% of OHL Brasil they don’t own, following their joint EUR2.5bn ($3.3bn) purchase of 60% agreed in April and closed this week.
PE Shop Takes Control of Maxcom
Mexican private equity firm Ventura Capital Privado has agreed to take control of Maxcom Telecomunicaciones, Maxcom says, concluding a process where the struggling telecom had courted buyers off and on over several years. Ventura has agreed to pay MXP2.90 ($0.22) per share, for up to 100% of Maxcom’s shares. It does not indicate the total shares involved, though the sale has an estimated enterprise value of about $270m, according to a source familiar with the deal. Holders of 44.29% have already agreed to sell, and the telecom will tender publicly for the rest. Ventura will also buy a minimum of $22m in new shares through a capital raise. The transaction is contingent on Ventura obtaining 50% of the shares by the close of the tender, and the completion of an exchange for Maxcom’s 11% 2014 bonds, of which there are $200m outstanding. If successfully concluded, the funds will allow Maxcom to expand in Mexico’s communications market, it says. HSBC advised Maxcom in the transaction. The company saw CFO Miguel Cabredo resign last month. Maxcom shares closed at MXP3.62 Tuesday.
Javer Picks Up ICA Homebuilding Assets
Mexico’s Javer has agreed to acquire homebuilding assets from ICA’s ViveICA unit, Javer says. The deal value was not disclosed, but ICA is to exchange the assets and their operating liabilities for a 23% stake in Javer. Javer also takes on responsibility for refinancing MXP600m ($46m) in project debt, and notes that it expects to use a multi-year term loan for financing at first, before replacing it in the bond market. Javer adds 20 developments in Baja California, Veracruz, Hidalgo, Guanajuato, and Quintana Roo, representing all of ViveICA’s assets apart from those in Peru, Ciudad Juarez, Chihuahua and a luxury apartment building in Distrito Federal. Following the deal, ICA becomes Javer’s third-largest shareholder and gets two seats on its board of directors. The new company is expected to generate positive cash flow after the deal, which is set to close at the end of first quarter 2013, pending regulatory approvals. Creel, Garcia, Cuellar, Aiza y Enriquez advised Javer, while Galicia Abogados and Goldman Sachs advised ICA. In a report, Barclays calls the transaction positive for Javer, noting an improvement in scale and geographical diversification.