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
Category: United States
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.
US Manufacturer Agrees to Chile Buy
Cleveland, Ohio-based Eaton Corporation is poised to acquire Chile’s Rolec Comercial e Industrial, subject to closing conditions, the company says. Rolec is a 73-year-old family business with 630 employees, according to a source familiar with the business. It makes integrated power assemblies and switchgear, with products used in Chile and Peru for mining and other industrial applications. Eaton, meanwhile, cites Rolec’s relationships as valuable to its growing business in Chile and Peru in sectors such as mining, pulp and paper, and energy infrastructure. “We are excited to add Rolec’s capabilities to our expanding operations in South America,” says Rich Stinson, president, Power Distribution for Eaton’s Electrical Americas Region, in a statement. Eaton had 2011 sales of $16.0bn.
US Manufacturer Lines up Bancomext Funds
US vehicle manufacturer Navistar has signed a $95m trade receivables facility with Mexico’s Bancomext, it says. The 5-year facility, done though Navistar’s Mexican unit, will support the sale of trucks and busses manufactured in Mexico and exported to Latin America. A spokeswoman did not comment on the rate, noting only that it is in line with Navistar’s other export financing.
Latam Airlines Lands Exim-Backed Bond
Latam Airlines Group has issued $288m in bonds guaranteed by the US Export-Import Bank. Issued through the Caroboa Leasing vehicle, the 2024 bonds with a 6.19-year average life priced at par with a 1.829% coupon, or MS+67bp, pricing inside of 70bp-75bp guidance. Proceeds from the issue will help the company formed from the fusion of Chile’s Lan and Brazil’s Tam fund the purchase of two new Boeing aircraft. Credit Agricole and Goldman Sachs managed the sale, aimed at US high-grade accounts and rated AAA. Mexico’s Pemex has taken advantage of US Exim guarantees to issue $1.2bn in the US market at lower rates in the past two months.
VC Partners Close Brazilian Fund
Sao Paulo-based venture capital firm Redpoint e.ventures has closed a $130m, Brazil-focused fund aimed at investing in startups. The firm is a JV between US-based venture capital firms e.ventures, formerly known as BV Capital, and Redpoint. The fund, its first is managed by founding partners Yann de Vries and Anderson Thees. The fund targets investments in the areas of consumer Internet, e-commerce, mobile, media and cloud services. The fund already includes 5 active investments – Viajanet, Grupo Xango, 55Social, Shoes4you and Sophie & Juliete – that the two firms had made together prior to the creation of the JV.
Chevron to Provide Loan for Vene JV
PDVSA and Chevron have agreed to terms for a $2bn financing for their Petroboscan joint venture, PDVSA says. The US oil producer is providing “long-term” loan at a rate of Libor+4.5%. It does not state the exact tenor, but says the last payment is scheduled for 2025. Petroboscan, operated by the two since 2006, plans to use the proceeds for increasing oil production in the Boscan oil field. The parties involved did not respond to request for additional comment.
American Electrical Supplier Makes Peru Buy
Anixter International has purchased Peruvian electrical wire and cable distributor Jorvex, it says, for $56.2m and the assumption of $10.5m in debt. The final price to be paid by the Chicago-based distributor of communication and security products, may also be subject to a net asset adjustment. Annual sales for Jorvex were approximately $115m in 2011, and Anixter expects the acquisition to be immediately accretive to earnings in the second half of 2012. Anixter is already active in Peru and several other Latin American markets. Anixter did not use an advisor, according to a spokesman.
US Developer Eyes CCD
Hines, a Houston-based real estate company, is planning to raise funds in Mexico’s certificado de capital de desarrollo (CCD) market, according to regulatory filings. The transaction, whose target size has not been specified, would create a fund to invest in the development of commercial and residential properties throughout Mexico. The CCD should be 10 years in length, extendable by up to 2 years. The return structure would be similar to other CCDs — principal plus a preferred return, with remaining proceeds divided 70% to investors and 30% to the managers. BBVA and Credit Suisse are managing. Hines has $36bn AUM globally, and has been active in Mexico since 1992. Real estate investment vehicles are expected to boom in the next few years, with investors now having Fibra real-estate income trusts, CCDs and IPOs to choose from. At least three Fibras are in the pipeline, bankers say, following Fibra Uno’s debut for the class. Property developer Vesta is preparing an approximately $300m IPO to price July 18.
Citi Leads DCM at Halfway Point
Citi led the LatAm DCM tables through the end of June, according to Dealogic, followed by HSBC and Itau. The US bank booked $12.6bn in volume from 52 deals in the first half when cross-border and local market deals are considered, ahead of HSBC ($8.2bn from 42) and Itau ($6.9bn from 41). Citi also claimed the lead when cross-border deals only are considered ($7.4bn), and when local market deals only are considered ($5.1bn). “Business has become fungible across product lines in the region, and we move pretty fluidly from one type of issuance to the other. Issuers are pretty agnostic about what they do, they just want the best terms,” Chris Gilfond, co-head of LatAm DCM at Citi, tells LatinFinance. Overall volume in the market remained on a pace to top last year’s record regional total. Cross-border volume in the region reached $54.2bn in 1H 2012, up from $45.3bn in 1H 2011, and marked the highest half-year volume on record, boosted by an aggressive first quarter. Volume with local market deals included was also higher, hitting $79.9bn, compared to $72.9bn in the corresponding period of 2011. “There is a really solid pipeline of business that should get done. It may need to wait a month or two in terms of finding the right window, but I’d expect something like second quarter volume in the third quarter,” Gilfond says. He expects DCM volume this year to exceed 2011’s total, both in terms of cross-border volume and combined cross-border and local market volume. In particular, appetite for global local-currency transactions should return, with deals appearing in between bouts of volatility. Brazil, Mexico and Peru led the region in 1H 2012, accounting for 54%, 22% and 6% of total volume respectively, Dealogic says. Citi also led in terms of DCM revenue, booking $52m, or 16.7% of the fee pool. The bank was followed by HSBC and JPMorgan, with $26m (8.5%) each.