US-based communications services group WPP has agreed to acquire a 20% stake in Argentine IT firm Globant for $70m, Globant says. The firm is present in several LatAm countries and has grown through acquisitions since 2003, boosted by private equity funds from investors including Endeavor Catalyst, Riverwood Capital and FTV Capital. Most recently it has acquired US-based mobile technology firm Nextive and Brazilian developer Terra Forum.
Category: United States
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Ally LatAm Assets Go Back to GM
Ally Financial has agreed to sell its operations in Brazil, Mexico, Colombia and Chile to General Motors, it says, as part of a larger $4.2bn sale of all Ally’s international assets. The total buy, including European and LatAm operations and 40% of a Chinese joint venture, comes at a $550m premium to book value, GM says. The auto lender formerly known as GMAC has been looking to shed the international operations since May. GM owned GMAC until 2006. Sullivan and Cromwell advised Ally on the deal, expected to close in mid-2013, subject to approvals. It follows the $865m sale of Ally’s ABA Seguros Mexico insurance business to Switzerland’s ACE agreed last month.
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US Real Estate Investor Plans CCD
LaSalle Investment management is preparing a MXP4.2bn ($321m) Certificado de Capital de Desarrollo (CCD) transaction in Mexico’s local market. The US real estate investment specialist is looking to create a fund investing in Mexican real estate assets, including office, commercial, industrial and residential properties, according to regulatory documents. The CCD is to be accompanied by a $15m parallel investment. LaSalle, who has invested more than $600m in Mexico through six previous private vehicles, is targeting a 16%-20% return. The plan includes a 4-year investment horizon, and doesn’t specify an expected total number of years, though CCDs typically have a 10-year maturity. BBVA Bancomer is managing the transaction.
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Sherwin Takes Comex
Sherwin-Williams has agreed to acquire Mexico’s Consorcio Comex for $2.34bn, it says. The US paint maker is to pay cash, and will also assume an unspecified amount of debt, in order to gain access to a higher-growth Mexican market. The sale of family-owned Comex is heard to come at the end of a competitive bidding process involving multiple parties. Analysts found it difficult to determine the multiple implied in the transaction, given that the target is privately held, but generally considered the deal to be positive. Sherwin says the transaction value comes at about 1.7x sales, in the only measure of valuation it divulges. Comex had total sales of $1.4bn in 2011, 34% of which came from US and Canada operations. Sherwin sees the deal doubling its business in LatAm. “While the financial details (primarily EBITDA) remain unclear, we view the deal as strategically accretive to the Sherwin-Williams franchise as it extends the company’s already impressive distribution network to Mexico and Latin America,” equity research firm Robert W. Baird says in a report. “Adding Comex provides additional exposure and scale in Latin America and should ultimately add to earnings,” Hilliard Lyons says, highlighting that Comex provides additional exposure to fast-growing markets. It is expected to benefit from Mexico’s active homebuilding sector, which is driven by government mortgage lending and favorable demographic and economic trends. Comex also offers exposure to the Western US, where Sherwin is seen as less strong. Sherwin expects the deal to be EPS dilutive in the initial quarter, and EPS accretive within 12 months. It plans to issue bonds to fund the purchase, it says. The transaction is subject to regulatory approval. Comex was advised by HSBC and White & Case. Jones Day was legal advisor to Sherwin, which does not respond to requests for comment on any financial advisor or additional financial details of the transaction. The sale is the largest takeover of a Mexican company b
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Briggs & Stratton Makes Brazil Power Grab
US-based Briggs & Stratton has agreed to acquire Brazil’s Companhia Caetano Branco for about $60m, the outdoor power equipment and generator maker says. It will make the buy using cash and existing credit, and anticipates closing within three to four months. Branco’s annual sales are reported to be about $40m, and its operating margins from 13%-17%. Briggs & Stratton sees the move as part of geographic diversification and product portfolio expansion. Selling generators, water pumps and light construction equipment, Branco has about 150 employees in Brazil. The companies declined to comment on advisors or to elaborate on the terms of the sale.
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Costa Ricans Get US Beer Brands
Cerveceria Costa Rica has agreed to buy North American Breweries for $388m cash from private equity fund KPS, it says. KPS formed the company, which operates the Genesse and Labatt brands in the US, in 2009 when it bought Labatt from Anheuser-Busch Inbev. UBS advised KPS and North American breweries on the sale. The transaction is expected to close by the end of the year.
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ADM Set to Unload Gruma Stake
Archer Daniels Midland (ADM) has reached a preliminary deal to sell its 23.2% stake in Mexico’s Gruma to ASUR chairman Fernando Chico Pardo, according to an ADM spokeswoman. The price was not disclosed, though the 23.2% stake would be worth approximately MXP5.42bn ($418m) at the tortilla maker’s Tuesday’s MXP41.43 closing price. The agreement also includes minority positions in various joint ventures with Gruma and its affiliates, and is non-binding. Bank of America Merrill Lynch is advising ADM. The US agricultural group is currently pursuing a AUD2.7bn ($2.8bn) offer for Australia’s GrainCorp. ADM first bought into Gruma in 1996.
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Swiss Insurer Adds in Mexico
Swiss multiline property and casualty insurer ACE has agreed to buy Mexico’s ABA Seguros from Ally Financial for $865m cash, it says. Mexico’s fourth-largest auto insurer is the latest regional financial asset to change hands, as international and regional players seek expansion and high growth rates. For Ally, the move represents a continuation of the American automotive financial services group’s plan to shed non-core international assets to better focus on US operations. ACE, a longtime operator in Mexico, is seen as better equipped to expand the business as demand for insurance products grows along with the economy.”ACE is in the position where it can add to the capital position [of ABA] if it wants to,” Paul Newsome, analyst at Sandler O’Neil, tells LatinFinance. Though the disclosure on the ABA sale is not sufficient to make a judgment on value, he notes ACE has a strong track record with international acquisitions. ACE says it expects the deal to be accretive to earnings in the first year and to meet or exceed the company’s long-term return on equity target – about 15%, according to analysts – by the third year. Canadians TD and Scotiabank were said to be among the other interested bidders. The transaction is expected to be completed during the first half of 2013 and is subject to regulatory approvals. Spokespeople from both parties decline to comment on the financial advisors. Sullivan & Cromwell were legal advisors to Ally. ACE operates in 53 countries, including Argentina, Brazil, Chile, Colombia, Ecuador, Panama and Peru. It operates ACE Seguros in Mexico, and last month agreed to buy Fianzas Monterrey from New York Life Insurance Company for about $285m. Ally announced earlier this year the intent to seek strategic alternatives for businesses in Brazil, Mexico, Chile and Colombia.
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UnitedHealth Pays up for Brazil Entry
UnitedHealth Group has agreed to pay $4.9bn to buy 90% of Brazil’s Amil Participacoes, the companies say, in a transaction seen as coming at a significant premium. The agreement gives the largest US healthcare operator an entrance into an underpenetrated Brazilian market and control of the country’s largest healthcare organization. The deal for 359m shares comes at BRL30.75 ($15.15) per share, representing a 21.5% premium to Friday’s BRL25.30 close. “This is a high price. We think UnitedHealth must see a large upside,” says a Sao Paulo equity analyst. He sees the transaction coming at 32.4x 2012 price/earnings and 26.4x 2013 p/e, compared to the respective 26.5x and 20.7x levels at Friday’s closing price. The US operator is paying up for an association with founder and CEO Edson Bueno – who keeps a stake and joins United’s board – and his track record in Brazil, as well as for access to a more vertically integrated model than it has in the US, the analyst notes. Both could be useful for future EM expansion as well as making improvements in United’s home market. Raymond James sees the deal at 38.2x 2013 p/e, it says in a report, yielding a 76% premium to Amil’s historical averages. “The valuation is rich for this kind of business, but the growth potential is much better than the US-based options,” Matthew Cofina, an analyst at Morningstar, tells LatinFinance. He notes it could boost United’s margins going forward, and that Brazil is an attractive base for possible additional acquisitions. UnitedHealth will buy Amil in a two-step process, with Brazilian tax benefits reducing the effective cost of the acquisition by $600m to $4.3bn. Following Brazilian regulatory approval expected in 4Q, UnitedHealth will buy 60% percent of Amil’s outstanding shares from controllers. In 1H 2013, it will make a public offer for the remaining 30% percent. Bueno has also agreed to invest about $470m in UnitedHealth stock and hold the shares for five years, with Bueno and partner Dulce Pug
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Swiss Insurer Adds Mexican Surety
Swiss insurer Ace has agreed to buy Mexican surety bond specialist Fianzas Monterrey from New York Life, it says, paying $285m cash. The deal expands Ace’s presence in Mexico, adding to commercial property and casualty, accident and health, and life insurance operations. The transaction, which is subject to regulatory approvals and other customary closing conditions, is expected to be completed during the first quarter of 2013. New York Life is shedding Fianzas, which it bought in 2000 from Aetna and Bancomer, because it is a non-core business. Established in 1943, Fianzas provides guarantees on construction and industrial projects, and is Mexico’s second-largest surety provider. Goldman Sachs advised New York Life.