Embratel has reached 92.2% of control of operator Net Servicios de Comunicacao, and plans to launch a tender for the remaining shares, delist them and prepare a reorganization of Embratel’s businesses in Brazil. Embrapar, the parent of the Carlos Slim-owned telecom, increased its stake in GB Empreendimentos e Participacoes, the company that controls Net, by 5.5% to a total of 54.5%, it says, to reach the 92.2% level. It plans to soon offer holders of all Net shares a maximum of BRL26.04 ($14.80) per share, adjustable for changes in the DI rate until the time of the offer. Should the price of the valuation of shares exceed the maximum price offered, Embrapar could choose to cancel the tender. Officials at Net and Embratel could not immediately be reached for additional comment as to how many shares Embratel targets and what it would cost. Following a delisting of Net, Embratel says it would examine a restructuring.
Category: M&A
US E&P Co Plans Venezuela Divest
Harvest Natural Resources (HNR), a Houston-based independent oil company, is aiming to sell off its 34% stake in the Petrodelta oil project in Venezuela. The company has already started talks with a potential “third party” to sell off its share in the venture in which it is partnered with state-owned Petroleos de Venezuela, PdVSA, the company says. A spokeswoman for Harvest declined to offer additional details of the ongoing process. Officials at PdVSA could not immediately be reached for comment. HNR has said that it began negotiations for the assets on March 5, but noted that there is no guarantee the talks will result in a final sale. As of end 2011, the Petrodelta venture controls roughly 194m barrels of oil in 3P reserves, a combination of proved, probable and possible reserves held underground, a 1% decline from 2010, following HNR’s reserve review.
Brazil Gives Nod to Petrobras, Shell Sales
Brazil’s regulatory authority has approved the sale of two oil block stakes by Petrobras and Shell. As disclosed by the regulator, Petrobras plans to sell a 40% stake in BM-CE-4 block in the offshore Ceara basin to BP’s Brazilian unit, BP Energia do Brasil. Similarly, Shell will sell a 40% participation in the BM-S-45 block to Petrobras, leaving the Brazilian company with complete ownership. A spokeswoman for Petrobras said the company should retain a 60% stake in the BM-CE-4 block in partnership with BP. She declined to offer additional details about the deal or to confirm the Shell transaction. A spokesman for BP also confirmed the deal but declined to offer additional details. Officials at Shell could not immediately be reached for comment. The BM-S-45 is a Santos Basin oil block, in close proximity to a string of landmark oil discoveries in the South American country. The absence of new oil licensing rounds has prompted a series of mergers and acquisitions deals led by oil companies holding prized Brazilian fields.
Canadians Bet on Brazilian Mine Driller
Canada’s Foraco International, a global mine drilling company, has agreed to acquire a controlling share of Brazilian mine drill services player WFS Sondagem, or Servitec. Under the deal, Foraco would pay BRL35.65m ($20.5m) in cash, and 4.8m shares of Foraco in exchange for a 51% stake in Servitec, Foraco says. Shares of Foraco traded on Monday at CAD4.69 ($4.72) per share. Valuing the stock component at that price would imply an additional CAD22.6m, for a total acquisition price of CAD58.25m. The deal also involves a call and a put option held by the parties to transfer the 49% stake remaining of Servitec shares in 2015. A spokeswoman for Foraco could not offer additional details. Officials at Servitec could not immediately be reached for comment. Foraco estimates that last year Servitec generated $70m in sales with an Ebitda margin of 24% or $16.8m in 2011 Ebitda. Taking last year’s Ebitda, the deal values Servitec at an implied enterprise value to Ebitda multiple of 5x. Foraco expects to use 1.3m shares held by the company in treasury stock and issue the remaining shares necessary to pay Servitec, the company notes. The transaction should close in April, subject to regulatory approvals. Servitec is considered the second leading mine driller in Brazil and is based out of Crixas in the state of Goias. Servitec has a presence in 4 Brazilian states.
Brazil PE Not Scared of Overinvestment
Private equity funds still see ample opportunity in Brazil despite the large amounts of money being deployed there. The vaguely defined “middle market” is still the sweet spot while new international firms have set up shop there amid expectations that valuations may be heading lower. Advent International’s Patrice Etlin estimates there is somewhere around $11bn in PE money available for Brazil at the moment. “Yes, it is a record number for Brazil. There has never been so much money and interest, but we are not in a situation like those found in other very hot emerging markets such as China, and it’s still far from the amount of capital committed in the US and other developed markets. If you compare it to the size of the broader Brazilian economy, it is still a relatively modest number,” Etlin tells LatinFinance. “There is a lot of opportunity in the $25m-$50m ticket space,” says Chris Bruneau, executive director at 57 Stars, an EM-focused fund of funds. “There are five to seven groups trying to raise money in that space. Even if they raise all of the money they hope to, there is going to be a pretty open market for PE in Brazil. There are a lot of opportunities.” Valuations have moved up in general, but this has occurred more at the top end of the market, Bruneau explains. However the slowdown in Brazil over the last three to six months has raised expectations that valuations should come down a bit. “We are moving toward a period of price adjustment and we expect to see the value reduction we’ve seen in the public markets migrate to private transactions. It hasn’t happened yet, so as a result we are currently seeing much less investment activity in private deals,” Etlin says. Meanwhile, Marcelo di Lorenzo, head of 3i Brazil, sees the middle market also having to accept lower valuations despite expectations to the contrary. ““In the middle market, the expectations could go up, but it is not as strong as in the higher-ticket deals. The companies soon realize that they
Carlyle Buys Brazilian Toy Chain
The Carlyle Group has purchased an 85% stake in Ri Happy, one of Brazil’s largest toy retailers. The private equity firm does not disclose the value of the deal, and says it intends to invest roughly BRL200m ($115.8m) in the company over the next three years. Carlyle acquired the stake with funds from its $1bn Carlyle South America Buyout Partners fund. Officials at Carlyle and Ri Happy could not be immediately reached for comment. Ri Happy operates 114 stores across 18 states in Brazil. Carlyle also owns stakes in Brazilian companies including tourism company CVC, lingerie company Scalina and the Qualicorp health plan administrator, which is preparing a follow-on equity sale expected to raise at least BRL400m.
Cosan Buys Exxon UK Lubricant Unit
Brazilian fuel distribution company Cosan has struck a deal to acquire Comma Oil & Chemical, a lubricants manufacturer in the UK owned by Esso Petroleum, a subsidiary of ExxonMobil. The deal is valued at less than $100m, and includes the ability of Comma to distribute Mobil brand products as well as to continue to supply products to Exxon companies, Cosan says. Comma produces and supplies lubricants and vehicle care products to Europe and Asia, a business that gives Cosan its first entry into Europe as a manufacturer. Cosan says it has no plans to downsize the business following the acquisition, but to operate it as it stands. Officials at Cosan decline to reveal the deal’s final price tag but note that it stands at less than $100m. “The company continues to seek businesses to acquire to diversify our portfolio and get a more stable Ebitda,” an investor relations official at Cosan says. Currently a full 37% of the company’s Ebitda comes from sugar and ethanol production, a quite volatile business, according to Cosan data, while 40% of it derives from the company’s fuel distribution business in Brazil. The lubricants division represents roughly 7% of Ebitda, with the rest coming from real estate and logistics businesses. The Brazilian company has lately been in an acquisitive mood. Just last week, Cosan announced the acquisition of a 5.7% stake in railroad operator America Latina Logistica for BRL896.5m ($525.7m).
Principal Buys Control of Brazil’s Claritas
US investment manager Principal Financial Group (PFG) has moved to acquire a controlling 60% stake in Brazilian mutual fund and asset manager Claritas Administracao de Recursos. The deal is expected to have a neutral effect on PFG’s earnings per share this year and to add to earnings per share and return on equity after 2012, the firm says. An official at PFG declines to give a specific amount for the deal but says it was between $60m and $85m. PGR expects this deal to result in more than a 15% IRR, a metric that PGR typically uses to judge investments, the spokesman says. Claritas officials could not be reached for comment. PFG was advised by Lazard Freres. Claritas currently holds more than BRL3.1bn ($1.8bn) in funds under management. PFG has pointed out that this acquisition is part of its overall investment of $800m to $900m this year, on top of $154m it will use to pay dividends and to buy back its own stock. In its previous acquisition in the region last April, PFG paid $198m for HSBC Afore, a unit of HSBC Mexico.
Argie Energy Co Plans Spinoff
Andes Energia, an energy company based in Argentina, is planning to break off its exploration and production unit from its electricity business, creating two separate entities. The plan is to separate the electricity unit which belongs to a highly regulated market, from the E&P business which has different levels of risk and return, Luis Alvarez Poli, Andes’ CEO tells LatinFinance. He declined to offer specifics on the time table, strategy or the logistics of this move. Alvarez Poli notes, however, that the decision comes at a time when the company has seen advances in its exploratory campaign and has managed to build up a portfolio of reserves to develop. The company owns power distribution and hydroelectricity generation assets and holds interests in several oil and gas blocks in Argentina.
Gafisa Rejects Zell, GP Offer
Brazilian homebuilder Gafisa has turned down an offer by GP Investimentos and Sam Zell’s Equity International to purchase some of Gafisa’s assets. It does not disclose the amount of the offer or what assets were involved, and officials at Gafisa could not immediately comment on the dealings. The company’s board of directors concluded that the offer from the two private equity funds “significantly undervalues Gafisa’s assets and businesses involved and implies substantial transaction costs and high execution risks.” A spokeswoman for GP Investimentos also declines to comment. Gafisa announced in early February that it had received a preliminary asset purchase offer from Zell and GP. The proposal marks a renewal of Zell’s involvement with Gafisa. Equity International sold off its final 2.7% stake, or 11.7m shares, in the real estate developer in August of 2011, worth about BRL84m ($54m) at the market price at the time. EI gradually reduced its stake in Gafisa starting in August 2010. Observers at the time attributed EI’s exit to Gafisa’s higher costs due to an investment in Brazilian builder Tenda, a player in the low-income segment of the housing market. Gafisa has 432.7m shares outstanding and a market capitalization of BRL2.32bn.