In the wake of the acquisition, Moody’s changed the rating outlook on Scotiabank Sud Americano to positive from stable. It has a financial strength rating of D+, long-term local currency deposits of A2 and the local currency senior debt is rated A2. “The acquisition of Desarrollo enhances Scotiabank’s franchise value in Chile,” says Moody’s. “Although the transaction will materially impact Scotiabank’s capital ratios, those ratios will remain within expectations at its current bank financial strength rating,” it adds. The acquisition will increase Scotia’s Chile deposit market share to 5% from 2% and almost tripling its branch network and enhance its earnings stability. “Presently, [Scotia Chile’s] franchise is weighted towards corporate banking and its earnings are low, on a risk-adjusted basis, due to a lack of business line diversification and poor efficiency,” says Moody’s. Desarrollo’s portfolio of loans to mid-sized companies and consumers will help diversify and make more granular the asset base, thereby, improving earnings stability, adds the agency.
Category: M&A
Acquisition Finance:
Latin American Mergers & Acquisitions (M&A) activity has been continuously increasing over the past years. Either through friendly buyouts or hostile takeovers, Latin American entities have been acquiring companies, financial institutions, or specific assets in the region and worldwide.
Looking North; Heading South?
Recent developments in the debt markets for acquisition financing by US companies, and in particular in leveraged buy outs (LBOs) led by private equity sponsors, are of interest to Latin American companies.
Merger Trend Intact
M&A activity remains brisk, leading many to ask when it will all end. But bankers expect continued flow in the second half, driven by a larger number of smaller issues, but with the potential for a jumbo trade, perhaps from a new market like the Andes. While smaller firms look to gain critical mass in competitive sectors, larger blue chips like América Móvil will look to spread their wings overseas.
As expected, this year has seen a greater number of transactions but lower volume overall. Dealogic data shows just over $71 billion from 839 deals for the year to mid-August, versus $101 billion and 603 trades in the corresponding period of 2006. Bankers say the drivers of the M&A revival are still in place. “We continue to see a good pipeline,” says Udi Margulies, head of LatAm M&A for Lehman Brothers.
América Móvil Makes Jamaica Acquisition
Mexico-based mobile phone giant América Móvil is planning to buy Jamaican cell phone company Oceanic Digital, according to wire reports. A deal is apparently set to be concluded in the fourth quarter, pending regulatory approval. América Móvil has its work cut out given the dominance in Jamaica of Digicel and Cable & Wireless. Oceanic also operates in El Salvador and the Dominican Republic.
FirstCaribbean Declines Comment on Merger
The acquisition of RBTT by FirstCaribbean is apparently still in the works, but those involved are keeping mum. “We do not comment on market rumors,” a senior FirstCaribbean official tells LatinFinance, in response to questions about the deal. Caribbean-based bankers said earlier this summer that the two financial institutions were still hammering out a price. According to people close to the banks, the combined entity would have assets of almost $20 billion, making it the biggest in the region. The retail and corporate/investment banking operations are seen as complementary and forming a regional banking powerhouse. FirstCaribbean is owned by CIBC.
Dresdner Moves LatAm M&A to São Paulo
Dresdner Kleinwort is moving its LatAm M&A team to São Paulo, from London. The bank recently hired Gabriel Nores to head the bank’s regional M&A effort, which has particular strengths in utilities and natural resources. Nores, a former employee of Dresdner, was previously working on private equity and M&A in Argentina. He will be joined in São Paulo by Eduardo Bertão, a utilities investment banker based in London. Bertão recently advised Ontario Teachers Pension Fund in its purchase of a 49% stake in Chile’s Esval for $365m. In the São Paulo office, Dresdner’s origination and DCM effort is run by Glenn Peebles, and is largely focused on Brazil. Peebles’ group is also in the process of adding a VP-level executive to assist with coverage.
Citi Beats JPM in the M&A Stakes
Citi has overtaken arch rival JPMorgan in this month’s M&A league tables from Dealogic. Citi is in first place on volume, with $15.83bn in proceeds from 29 deals as of mid-August. This compares to second as of mid-June, with $11.17bn off 21 transactions. In second place this month is JPMorgan, with $12.93bn in proceeds from 28 deals, Dealogic data shows. Particularly impressive is Citi’s command of fees in this space, with $66.99m in revenues, or 28.19% of the market. In second is Goldman, with $31.20m and 13.13% share, says Dealogic.
Moody’s Mulls Axtel Upgrade
Moody’s has put Axtel’s Ba3 rating on review for upgrade after better-than-expected operating and financial results following the acquisition of Avantel, as well as the issuer’s favorable business prospects. The news affects the following bonds: $162.5m in an 11% of 2013 and $275m in 7.625% of 2017 globals. The ratings review will focus on Axtel’s ability to turn free cash flow positive in the short to medium term as well on the sustainability of the company’s increased cashflow. Specifically, Moody’s will evaluate Axtel’s income quality and stability in the context a more competitive operating environment. In the first six months of 2007, Axtel revenues reached close to $890m, with a 41.5% adjusted Ebitda margin. It is the second-largest, fixed-line telecom in Mexico with an 8% revenues market share as of June 2006, says Moody’s.
Scotiabank said Mulling Chile Acquisition
Canada’s Bank of Nova Scotia is rumored to be buying Chile’s Banco del Desarrollo in a transaction with an estimated value of $1bn, according to Chilean media. The rumors follow Citi’s purchase of a piece of Banco de Chile, which Moody’s predicted would have wider repercussions. Other potential targets in Chilean bank M&A include CorpBanca and Banco Security, according to the agency.