Brazil PE Opportunities Abound: Fraga

Shuttered equity markets and highly stringent bank borrowing creates a host of new opportunity for private equity managers in Brazil, according to Arminio Fraga, founding partner of Gavea Investimentos, the Rio-based asset manager. Gavea has already spent half the $1.2bn it raised for its third PE fund in August 2008 and says the difficult financing environment is convincing controlling shareholders to sell at lower levels. “We are seeing very good opportunities,” says Fraga. “The durable goods sector has been more affected than, say, retail,” he tells LatinFinance, referring to lower valuations because of a lack of available capital. “Our illiquids strategy has grown a lot in the past two and a half years,” Fraga says. He declines to specify when a fourth fund will be raised, but suggests there will be one at some stage. Aside from seeking deals in the private market, Gavea and GP Investments are among the local PE shops who have stepped up their purchase of stakes in public companies as market valuations have come down. One of Gavea’s funds acquired an 11.7% stake in publicly traded retailer Lojas Americanas mid-December. The stake came from a block of shares that had been divested by Sao Paulo-based Mu Hak You, who runs embattled equity manager GWI. This month, GP negotiated a 47.7% stake in publicly listed Invest Tur, in a deal that began with open market purchases and was done in connection with its LA Hotels unit.