PDVSA has paid ExxonMobil $251.9m as compensation for the assets the global oil major lost to a nationalization campaign in 2007. The payment comes after making some adjustments to the $907.6m figure that the International Chamber of Commerce (ICC) awarded Exxon in its early January ruling, PDVSA says. As agreed, following the ruling, PDVSA planned to discount the amount Exxon owed for the outstanding debt of the nationalized Cerro Negro project in which PDVSA and Exxon worked as partners, an additional $300m that Exxon managed to freeze from PDVSA in a New York account and additional money the tribunal credited to PDVSA’s obligations to Exxon. The ICC ruling fell below the $7bn-$10bn that Exxon originally sought as compensation for its nationalized assets. Despite the payment, however, Exxon has a pending case against Venezuela at ICSID, the arbitration unit of the World Bank. PDVSA has long insisted it would pay only the book value of those assets and not the fair market value that the aggrieved oil companies sought to receive.
Category: M&A
BR Malls Adds 33% Mall Stake
BR Malls has acquired a 33% stake in the Itau Power shopping center, cementing its presence in Brazil’s Minas Gerais state. BR Malls will pay BRL85.5m ($51m) for the participation, plus an additional BRL2.3m for one third of the parking operation, the company says. As per BR Malls’ estimation, the mall will likely generate BRL9.8m in net operating income over the coming year. BR Malls and Itau Power officials could not immediately be reached for additional comment. BR Malls estimates the price paid gives it an implied real and unleveraged internal rate of return of 14.2%, and 14.5% with the parking buy. With the deal, BR Malls increases its total gross leasable area to 1.47m square meters.
Merck Inks Brazilian JV
Global pharmaceutical company Merck has struck a joint venture agreement with Brazil’s Supera Farma Laboratorio, a pharmaceutical firm, for the distribution of generic pharmaceuticals. In the deal, Merck will directly partner with Cristalida and Eurofarma, two of Brazil’s largest pharmaceutical companies and co-owners of Supera, to distribute and promote a portfolio of 30 products, the company says. Merck will control the Super Farma JV with a 51% stake, and the remaining stake held by Cristalida and Eurofarma. The Brazilian partners are giving Merck control in exchange for contributing a number of product brands. Merck officials declined to give more specifics about the deal and could not say how many of the 30 products held by the JV will come from Merck. A spokeswoman does say that the partners expect the JV to reach $500m in sales by 2017.
More Mexican Bottling Mergers on Horizon
More Mexican Coca-Cola bottling acquisitions are on the horizon and perhaps some regional expansions as well. Timing, however, may be later rather than sooner as targets hold out for better pricing. Mexico-based Actinver analyst Karla Peaa expects bottlers Arca Continental and Corporacion del Fuerte could mark the year’s first link-up. This is because the former has a large chunk of Northern Mexico’s market while the latter controls Chihuahua, Sinaloa and Baja California, the other three remaining large markets in the north. “A Continental, Corporacion del Fuerte deal makes the most sense,” Pena notes. “It will provide Continental with a bigger territory while reducing production and transportation expenses.” Fernando Olvera, a Coca -Cola Femsa analyst with BBVA in Mexico City, agrees that an Arca Continental-Fuente combination may be on the cards, but that a deal could take some time to hatch. Fuerte has hinted it will not sell cheaply. “We are definitely going to see more of these deals in Mexico in coming months,” says HSBC analyst Lauren Torres. “There are still many independently run companies willing to sell to gain scale and cut costs amid high commodity prices.” Coca-Cola Femsa, Mexico’s largest bottler of Coca-Cola products, is also likely to make more acquisitions in Mexico to consolidate its domestic lead before pursuing deals elsewhere. Arca Continental’s acquisitions may apply pressure to Femsa to buy or risk losing its market lead. Apart from del Fuerte, other Mexican bottlers up for grabs include Corporacion Rica, Embotelladora de Colima, Yoli de Acapulco, Bepensa, Bebidas Refrescantes de Nogales, and Embotelladora del Nayar The market has already seen Coca-Cola Femsa buy Mexican bottlers Grupo Tampico, Cisma and Queretano for $2bn in total. Recent acquisitions are expected to boost Coca-Cola Femsa’s sales 30% and generate synergies of $60m after the integrations are completed, giving Femsa 53% of the market. Arca Continental, meanwhile, will control
Brasil Foods Strikes Chinese JV
Brasil Foods (BRF) has struck a joint venture agreement with Dah Chong Hong Limited (DCH), one of China’s largest food, automobile and consumer product companies, with the intent of developing BRF’s distribution and production presence in China. Under the 50-50 agreement, the partners will focus on developing BRF’s Sadia brand in the country and building capacity in sales and other stages of the business, BRF says. BRF officials could not immediately comment further on the deal. Officials at DCH could not be reached for comment. As part of the JV, BRF will devote its efforts to production and marketing, while DCH will enhance the supply chain and distribution sides of the business. The partners estimate that they will generate revenues of roughly $450m during the first year of operations.
Patria Buys into Power Trader
Brazil’s Patria Investimentos has purchased a 50% stake in power trading firm Capitale Energia. With the deal, Patria seeks to establish a firm presence in the business of energy trading in Brazil, the companies say. Capitale’s sales stood at BRL215m in 2011 and it expects to see sales increase as the market for Brazil’s power trading expands, surpassing its current size of BRL10bn ($5.8bn) a year. A Patria spokesman declined to offer any additional details about the transaction. Officials at Capitale could not be reached for comment. Patria, a leading private equity player in the South American country, currently has more than BRL10bn under management and is building its business in real estate and infrastructure ventures.
Petrobras Preps Divestment Plan
Brazil’s Petrobras will soon begin executing its planned $14bn divestment of assets, as a part of the oil company’s ambitious investment program. The divestment plan is expected to begin sometime before mid-year, an official confirms. Petrobras has considered selling off some non-core businesses in part to help finance its $225bn 5-year capex program. Officials at Petrobras could not immediately say what type of assets the company seeks to sell or if it has hired advisors. Most of Petrobras’ ventures remain in the exploration stage and many have seen delays in execution, an issue that is putting pressure on suppliers and other service companies.
Brazil Pharma Continues Consolidation
Brazil Pharma continues its consolidation push after agreeing to acquire Sant’ana Drogaria Farmacias in a three-step transaction that values Sant’ana at BRL495.7m ($288.3m). Initially, Brazil Pharma, through its Farmais subsidiary, will acquire a 70% stake in Sant’ana in a BRL347m transaction, Brazil Pharma says. Of the total amount, BRL247m will be paid in cash and the remaining BRL100m will be held as collateral to cover any contingency. The remaining amount will be released to sellers of Sant’ana 4 years after the deal closes. Following this acquisition, Farmais will acquire the remaining 30% of Sant’ana shares left, making Sant’ana shareholders new shareholders in Farmais, the company says. In a third step, Brazil Pharma will merge all shares of Farmais and give former Sant’ana shareholders 15m newly issued ordinary shares, marking a capital increase of BRL150m, according to Brazil Pharma estimates. The holders of these new shares will be expected to hold them under a lock-up agreement for 3 years. Officials at Brazil Pharma did not return calls for comment. Sant’ana officials could not immediately be reached for additional details. The deal comes 3 months after BTG Pactual-controlled Brazil Pharma bought rival Big Ben in a deal valued at BRL453.6m ($259.4m).
Carso Set to Delist Cicsa
Carlos Slim’s Grupo Carso has raised its stake in the Carso Infraestructura y Construccion (Cicsa) construction subsidiary to 99.88% through a buyback offer, allowing it to proceed with a delisting of the company. Carso spent MXP6.77bn ($533m) to buy up 825.4m shares, or 32.82%, through an offer closed last week. It paid MXP8.20 per share.
BR Foods to Fully Absorb Sadia
Brasil Foods (BRF) has decided to fully absorb frozen food producer Sadia as a way to streamline the business. The move would result in BRL215m ($125m) in losses based on a 2011 fiscal year valuation, allowing for deferred income tax and social contribution over tax losses, the company says. Under the deal, the company expects to reduce operating and administrative costs and rationalize certain aspects of the business. Sadia’s shares are already 100% owned by BRF but these would be cancelled, and Sadia would cease to operate as an entity following the absorption. BRF officials could not immediately offer any additional details on the move and could not say if the company retained any advisors. The Sadia move comes just two months after BRF and Marfrig agreed to swap a number of assets to satisfy asset divestments that regulators demanded from BRF and increase Argentine exposure to its portfolio of businesses. BRF was originally born from the combination of Perdigao and Sadia in 2009.