Asians, Americans and Europeans acquiring regional assets is likely to remain the dominant theme for M&A in Latin America for at least the remainder of the year, bankers say. “The pillars of what we’ve seen over the last few years continue to be valid, which is Brazilians consolidating the local markets, and foreigners moving into LatAm as a whole,” Jean-Marc Etlin, head of Itau BBA Investment Bank, tells LatinFinance. Private equity activity in the region is also a consistent driver, he says. Larger and cash-rich companies in LatAm looking beyond the region is still a less established trend. Bankers say the segment has barely scratched the surface of European divestures in LatAm, and there could be many more to follow. That said, there have also been some interesting additions – ranging from Spanish toll road operator Abertis to Dutch vitamin producer Royal DSM – by Europeans who can still afford to buy. “Buying in Europe is not as easy as people think. It is easier for Europeans to buy in Latin America,” Gerardo Mato, CEO of HSBC global banking, Americas, tells LatinFinance. “If you are cash rich, you are trying to buy companies at very acceptable multiples, and try to grow it from there. We are seeing Latin Americans interested in buying European assets, and what we are seeing is also a lot of Europeans reassessing whether to sell at current multiples.” The league tables, heavily influenced by AB Inbev’s $20bn purchase in July of a 50% stake in brewer Modelo, put Bank of America Merrill Lynch in the lead with $43.30bn from 20 deals through August 24, according to Dealogic. The US shop is followed by JPMorgan ($41.00bn from 26) and Lazard ($32.65bn from 15). BTG Pactual has earned the most revenue, with $75m, or 49% of the pool.
Category: M&A
US Manufacturer Agrees to Chile Buy
Cleveland, Ohio-based Eaton Corporation is poised to acquire Chile’s Rolec Comercial e Industrial, subject to closing conditions, the company says. Rolec is a 73-year-old family business with 630 employees, according to a source familiar with the business. It makes integrated power assemblies and switchgear, with products used in Chile and Peru for mining and other industrial applications. Eaton, meanwhile, cites Rolec’s relationships as valuable to its growing business in Chile and Peru in sectors such as mining, pulp and paper, and energy infrastructure. “We are excited to add Rolec’s capabilities to our expanding operations in South America,” says Rich Stinson, president, Power Distribution for Eaton’s Electrical Americas Region, in a statement. Eaton had 2011 sales of $16.0bn.
Casino Increases GPA Position
French retailer Groupe Casino has increased its stake in Wilkes, the holding company that controls Brazilian retailer Grupo Pao de Acucar (GPA), it says, after the family of Brazilian businessman Abilio Diniz exercised a put option. Casino now controls 52.5% of voting rights in Wilkes and 70.4% of its shares. Casino wrested control of the supermarket operator earlier this year, ousting Diniz, who retained the option to sell down his position.
Codelco, Anglo Settle Mine Fight
Codelco and Anglo American have ended their dispute over a Chilean mining complex, Codelco says, with Chilean miner ending up with a lower stake than it wanted, but at a discounted price. The $2.9bn deal for a piece of Anglo’s Anglo American Sur (AA Sur) unit comes the day before a court-imposed deadline. Anglo reduces its ownership to 50.1% from 75.5%, while Codelco and its financing partner Mitsui come away with a 29.5% stake, below the 49% it originally sought. In the first piece of the transaction, Codelco-Mitsui JV controlled by Codelco acquires a 24.5% stake in AA Sur for $1.7bn, representing a consideration of $1.8bn, adjusted for dividends paid in 2012. Codelco also receives some undeveloped properties from AA Sur. Separately, the JV gets another 5% of AA Sur for $1.1bn, with 4.1% of that coming from Anglo partner Mitsubishi, who retains 20.4%. Anglo American also pays Mitsubishi a $40m fee for its participation in the agreement. The transactions will be settled in cash and Anglo American intends to use the proceeds for general corporate purposes. Cleary Gottlieb advised Codelco and Shearman & Sterling advised Anglo American. Codelco had initially wanted to exercise a decades-old option to purchase 49%, and last year signed financing agreement of up to $6.75bn with Mitsui to fund the buy. Anglo agreed in November to sell 24.5% of the mine to Mitsubishi for $5.4bn, in an attempt to thwart Codelco’s exercising of the option. The two sides paused court proceedings in May to allow for talks. Mitsui is now lending Codelco $1.86bn for one year, and will have a 17% stake in the JV that can increase by 15.25% if it offers long-term financing.
Itau Sets Redecard Offer Date
Itau has set Sept 24 as the date for an auction to buy the 49.99% it does not own in Redecard, it says. The bank is offering BRL33.00 per share to bring the credit card processor wholly in-house, in a move that could cost it as much as BRL11.8bn ($5.84bn).Redecard shares closed Thursday at BRL33.89. Itau first announced its intentions in February, though gripes from minority shareholders threatened the process, until a second evaluation of Redecard supported an initial one. The bank aims to delist Redecard, which held an IPO in 2007.
Buyers Line up for Cruzeiro
At least 20 banks have been qualified to submit proposals for the purchase of Banco Cruzeiro do Sul’s assets, according to a person familiar with the sale, though any deal is contingent upon a minimum 90% acceptance of an exchange offer expiring September 12. Eligible buyers are Brazilian banks with at least BRL2.5bn ($1.24bn) in assets and able to inject some BRL800m in to Cruzeiro, which was revealed to have a BRL2.24bn shortfall due to fraud. The Fundo Garantidor de Credito (FGC) administering Cruziero launched last week a tender seeking to buy back $1.58bn in six series of the lender’s dollar bonds at about 49% of face value, hoping to lure subordinated and senior debt holders faced with the alternative of liquidation and a likely recovery rate of close to zero. The FCG is offering $560 cash per $1,000 principal for Cruzeiro’s 8.00% 2012 bonds. It is also offering $510 per $1,000 for its 7.00% 2013, 7.625% 2014 and 8.50% 2015 and 8.250% 2016 bonds. Holders of the 8.875% subordinated bonds receive $260 per $1,000. Those accepting before an August 28 early deadline receive an extra $50 per $1,000. Acceptance of the offer is far from assured. “The general tone is not very positive and it looks like bondholders are going to be treated unfairly,” says an investor following the situation. Bank of America Merrill Lynch and HSBC are managing the offer. The 2020 bonds traded at 22 in price Tuesday, according to a trader. BTG Pactual had previously been rumored to be in discussions to buy the bank. Brazil’s central bank seized Cruzeiro in June after finding “unsubstantiated asset items,” and the bank has been under the temporary administration of the FGC during the fraud investigation and process of seeking a sale.
ICA Looks to Shed Homebuilding Unit
Mexico’s Empresas ICA is looking to sell its ViveICA homebuilding unit, a business providing only marginal revenues and EBITDA to the builder and engineering group. “It is indeed subject to be sold, as any asset within the portfolio that doesn’t provide a substantial component to the construction division,” a source at the company says, noting ViveICA provides less than 5% of revenues and Ebitda. ICA’s Ebidta in 2011 was MXP6.59bn ($500m), according to its financial statements.
Panama Copper Gets $1bn Boost
Canada’s Franco Nevada has agreed to provide $1bn in funding to Inmet Mining’s Cobre Panama project in exchange for future precious metals production, it says. The funds are to be delivered over a 3-year period to the project, which has total funding needs of $6.2bn. In exchange, Franco Nevada receives a percentage of the precious metals output, indexed to copper and payable in gold and silver. Cobre Panama has received 20% equity funding from the Korea Panama Mining Corp consortium, and also raised $1.5bn in the bond markets in May. The 8.75% 2022 NC4 bond came at a 9.00% yield, via Citi, Credit Suisse, BAML, JPMorgan, Morgan Stanley and RBC. The $1bn from gold-focused royalty and stream company Franco Nevada brings the total committed funding to $4.2bn, says a person familiar with the project, and Inmet is expecting to use operating cash flow to round out the funding needs. The transaction was handled by internal advisors, say sources familiar with the deal. Cobre Panama’s first production is expected in 4Q 2015.
Sura Remains on Lookout: CFO
With M&A bankers claiming that European divestment of LatAm assets still has room to continue, Colombia’s Grupo de Inversiones Suramericana (Grupo Sura) is among those remaining on the lookout for additional financial assets, its CFO says. “The exit of European financial groups is being substituted by financial groups from Latin America and North America,” Ignacio Calle tells LatinFinance, noting that Grupo Sura remains “watchful for new opportunities that come our way.” These would be particularly in financial services, insurance, social security, savings, and investments. “Many of the large European financial groups are in the process of reducing their size and investment in the region,” Calle says. This retreat had been forced on European lenders, Calle says, not by a lowering of their expectations across the region, or by poor investments, but because “some of them have been forced by their European regulators to decrease investment.” In 2011, Grupo Sura paid $3.76bn for ING’s Latin American pension and insurance assets, funded through a COP3.5trn ($1.8bn) equity follow-on, and additional investment from strategic partners. This year, European selloffs have included HSBC unloading of operations in 3 Central American countries to Colombia’s Davivienda for $801m, and operations in Colombia, Uruguay, Peru and Paraguay, to GNB Sudameris for $400m. Spain’s BBVA is considering selling all or part of its pension units in Chile, Colombia, Peru and Mexico.
AMX Closes in on Telmex Delisting
America Movil is seeking to complete the process to delist its Telmex unit by offering to buy the remaining 2.79% percent of the fixed-line company’s shares still outstanding, it says. Last year the Carlos Slim-controlled wireless operator bought a large chunk of the outstanding stock last year, and held 97.2% of Telmex as of April. In the latest offer, AMX is offering 10.225 pesos ($0.78) per share, equivalent to last year’s offer after accounting for dividends. Telmex shares, which trade infrequently, closed at MXP10.01 Friday. AMX will ask regulators for permission to do the tender “in the coming days.”