Hostile Takeovers Seen Remote in Brazil

M&A activity is picking up in Brazil at a brisk pace, with 2008 deal volume on track for a record year, according to Dealogic. But hostile activity – whereby an acquirer makes an unsolicited, often public offer to acquire the shares of its target – is likely to still be some years off in Brazil, according to a panel of bankers and lawyers at a Brazilian-American Chamber of Commerce event Wednesday. “In three to five years, this market will develop aggressively,” says Nicholas Aguzin, head of LatAm investment banking at JPMorgan. “But it’s unlikely that we’ll see any hostile transactions in the next few years.” The reason is primarily the country’s low level of publicly traded stock combined with an absence of shareholder activism that is instrumental in supporting hostile bids. While Brazilian entities have raised upwards of $65bn in the equity markets in the past few years, much of that on the more transparent Novo Mercado, regulatory changes are also still needed. “It is mathematically possible to have a hostile takeover in Brazil,” says Eduardo Boulos, a partner in M&A at Sao Paulo law firm Levy Salomao, referring to the fact that many companies listed on the Novo Mercado have a diverse enough ownership structure to allow it. But so far, there have been no successful such deals – only exclusive, negotiated “friendly” transactions, with the only major attempt – Sadia’s 2006 bid for Perdigao – failing for lack of an attractively priced offer.