Argentina has followed through with plans to take control of oil company YPF, sending congress a bill to nationalize 51% of the oil producer and issuing a presidential decree establishing immediate temporary government control, according to wire and local news reports. An Argentine court is to determine how much the authorities would have to pay for the stake, and the current board of directors will be removed. “While in the short term we could see higher investment and oil production, over the medium term we see the creation of another public controlled company as deleterious to overall macro efficiency given the likely mix of commercial and public policy objectives,” Goldman Sachs says in a report. It notes that paying for the nationalized shares will add an extra fiscal burden for a country that still lacks access to conventional and stable sources of non-inflationary financing. Goldman expects the bill to pass in congress. “We think that it is likely the government will attempt to pay for the company its book value, which stands at $4.3bn as per YPF’s latest balance sheet. If this prognosis materializes, then it is likely Repsol will take the case to international arbitration,” Citi says in a report.
Category: M&A
Camargo Offer too Low for Cimpor
A recent takeover offer from Brazil’s Camargo Correa is too low and undervalues Cimpor, Cimpor says. However, the Portuguese cement company also finds that the offer, made at the beginning of the month, lacks enough detail for the company’s board to say whether minority holders should accept it or not. In addition to lacking a premium, Cimpor finds the offer is unclear on what would happen to Cimpor’s asset portfolio, debt profile and dividend policy. Acting through its InterCement Austria unit, Camargo Correa offered to pay EUR5.50 per share for the 444m (66.75%) shares it doesn’t own in Cimpor, implying a maximum of EUR2.4bn ($3.2bn). The Brazilian conglomerate says it aims to further both its own and Cimpor’s international expansion, and to continue to build a balanced portfolio between mature markets and markets with high growth potential. It would also seek to merge InterCement’s cement and concrete assets in South America and Angola with Cimpor. Santander and Lazard are advising Cimpor.
Colombian Oil Unit Changes Canadian Hands
Canada’s Parex Resources has acquired TargetCo, the Colombian unit of Bermuda-based Nabors Industries for $73m cash, it says. The transaction gives Parex exploration licenses that span 567,000 gross acres in the Llanos and Magdalena basins, and is to be funded from its working capital. Target produces approximately 100 barrels per day from the middle Magdalena basin, where it has 2 exploration blocks. It has 5 exploration blocks the Llanos basin. RBC advised Parex.
Argentina Ups Ante with YPF Takeover Plan
Though effects of Argentina’s plan to acquire a majority position in oil producer YPF have largely been priced in by the markets, the effects of the action should have a much broader reach, analysts say. The government is preparing legislation declaring 50.1% of YPF’s shares public property subject to expropriation, according to a draft of the legislation published in local media. A formal announcement was expected by President Kirchner as soon as late Thursday night. “This is the worst case scenario for YPF and for Argentina. The government can do a lot to hurt shareholders and this will certainly delay the development of shale opportunities in Argentina,” a New York-based equities analyst says. The legislation also expands the government’s powers across the hydrocarbon sector. Whether a sale price would be open to negotiation with Argentina’s Grupo Petersen and Spain’s Repsol – the holders who stand to lose shares – or whether a tag-along offer would be made to minority holders, was not immediately clear. “At the end of the day this means they are ousting the present management. It seems this is a mixed corporation closer to Petrobras or Ecopetrol than to the PdVSA model. Now we need to see what this will mean for the company’s pursuit of returns,” Emerson Leite, equities analyst at Credit Suisse, tells LatinFinance. The company will likely distribute less in dividends and if it moves to reinvest that money that may theoretically be good, he explains, but state companies tend to be less efficient. The nationalization is certainly not helpful to attract investment for the development of shale opportunities, he says, as it creates anxiety and uncertainty among investors. “This ups the Ante. Argentina has long had an environment seen as unfriendly to business, but this is a step beyond,” says Boris Segura, strategist at Nomura, tells LatinFinance, noting that the effect is mostly, but not completely, priced into Argentine bonds. The markets had largely anticipated th
Cosan, BG Discuss Comgas Sale
Brazil’s Cosan is in discussions with BG Group about buying BG’s stake in Brazilian gas distributor Comgas, it says. UK-based BG owns 60% of Comgas. Such a move would fit in with Cosan’s strategy of expansion into distribution and logistics. In recent years, the sugar and ethanol producer has formed a fuel distribution venture with Shell, created the Rumo Logistica ethanol transport unit, and recently acquired a stake in railroad operator America Latina Logistica.
Corpbanca OKs $650m Raise
Shareholders of Chile’s Corpbanca have approved a $650m capital increase, in a needed step to finalize the December acquisition of Santander’s Colombia unit, Corpbanca says. The capital increase will result in the issuance of 48bn new shares that Corpbanca hopes to sell between May and June, an investor relations official says. Corpbanca plans to begin a road show in May and expect to have obtained the funds by the end of June. The capital increase comes as a prerequisite to finalizing the acquisition of Santander’s Colombia assets, first announced in early December. As agreed, Corpbanca is acquiring a 95% stake in of the Santander unit in Colombia for $1.16bn, a transaction with an implied multiple of roughly 2.7x book value.
Qualicorp Adds Broker
Brazilian healthcare company Qualicorp has agreed to acquire the Padrao Group, an insurance broker, in a transaction worth BRL180m ($98m), it says. Qualicorp executed a purchase agreement through which it bought 25% of the Padrao Group companies from Mauro Luis Lapa e Silva and also bought Voloto Consultoria Empresaria, a holding company that controls the remaining 75% of Padrao, from Ocimar Lima Duarte. With the acquisition, Qualicorp builds on its plan to enhance its business in the affinity group health plans business. Officials at Qualicorp did not comment further on the deal, while Padrao officials did could not immediately be reached. Padrao is a manager of benefits and services broker for insurance plans in the affinity group health segment. The deal remains subject to approval from Brazilian regulators. Qualicorp is scheduled to hold an equity follow-on of more than BRL600m next week, though it will not raise any new money in the all-secondary share sale.
Credicorp Eyes Chilean Brokerage Buy
Credicorp, the holdco for Banco de Credito del Peru, is currently in talks to acquire a controlling stake in a Chilean brokerage, part of a strategy to expand its presence in the region, it says. Credicorp has been negotiating details of the deal, including the valuation, for two months now, an investor relations officer says, and no date is set yet to reach a conclusion. As things stand, Credicorp is looking to buy a 51% in a brokerage, the name of which Credicorp officials refuse to reveal. The Credicorp official declines to discuss an amount to be paid for the brokerage, but notes that the bank is seeking to expand its business to neighboring countries following the business of Peruvian countries that are now venturing abroad. Banco de Credito del Peru recently acquired a majority stake in Colombia’s Correval.
Peruvian Cement Producers Ponder Merger
Peru’s Cementos Lima is pondering a potential merger with its counterpart Cemento Andino, also a Peruvian company, and has hired Citi to advise on the potential deal, it says. Citi is expected to value both companies to better gauge an appropriate exchange of shares for merger purposes. Officials at Cementos Lima could not immediately comment. A spokesman for Cemento Andino declined to offer any details of the potential deal. Talks between the companies emerge at a time of some capital markets activity for the Peruvian cement sector. In early February, Cementos Pacasmayo, a competing peer of Andino and Lima’s, made its ADR debut with a $264.5m equity follow-on. Many observers see a potential upside for the sector given the Andean country’s growth prospects.
Redecard Valuation in Line with Itau Offer
The BRL35.88 per share independent valuation of Brazilian credit card processor Redecard is in line with Itau’s BRL35.00 offer made for the company in February, according to analysts. The finding by Rothschild, hired by minority Redecard holders, leaves little room for Itau to increase its offer price, Deutsche Bank says, calling it fair and recommending that minority holders accept. Citi and BR Partners are set to issue a fairness opinion on Rothschild’s valuation report, Deutsche says, which should be performed over the next 2 weeks. This would be followed by a final tender offer from Itau. “Whether or not Itau will be successful in the tender offer we think the above concerns mean that a large pricing power held by the controlling shareholder make it more difficult for minorities to argue for a better price in this negotiation,” Barclays says. Barclays expects the tender to take place and Itau to end up buying most of the Redecard free-float, if not all, even if it is less than the minimum two-thirds required to de-list Redecard. Itau has offered to purchase 336.4m Redecard shares, or 49.985% of the company, for BRL35.00 per share, with the intention to delist it. Itau is advising itself in the process.