Internationals Continue Targeting M&A

A recent wave of M&A Transactions, most recently Diageo’s purchase of Brazil’s Ypioca, has seen international players look to capitalize on LatAm’s, and specifically Brazil’s, growth story. Continued international strategic investment, also highlighted last week by GE buying a slice of EBX and General Mills taking Yoki Alimentos, should be a theme in the remainder of the year, as should continued European divestment, bankers say. There has been $64.93bn in M&A volume done this year through May 25 from 764 deals, according to Dealogic compared to $64.83bn from 672 transactions in the corresponding period in 2011. “The increase in volume is mainly a result of deals getting moved to this year from last year,” says a senior new York-based LatAm investment banker. He adds that certain large deals have moved the needle this year – the 5.63bn Abu Dhabi investment in EBX and Itau’s move for the rest of Redecard come to mind – but might not be indicative of a true uptick in volume. Still, strategic interest may well push volume higher. International spirits company Diageo agreed to purchase Brazil’s Ypioca Agroindustrial Limitada, it says, for BRL900m ($454m). The move adds the cachaca producer with 8% market share to Diageo’s assets in Brazil, which include the Nega Fulo cachaca and distribution of its well-known global brands including Johnnie Walker, Guinness and Smirnoff. The transaction is expected to be earnings per share neutral in year 1, and profit positive in year 5. Morgan Stanley advised Diageo, which is also negotiating to acquire Mexico’s Jose Cuervo. In another deal, Japan’s Takeda Pharmaceutical agreed to buy Brazil’s Multilab Industria e Comercio de Productos Farmaceuticos for BRL500m cash, the companies say. The move gives one of Aisa’s largest drugmakers a sales network in the country where it already has a commercial subsidiary. Multilab’s owners, Genesio Cervo and Rejane Gobbi, will get as much as BRL40m in additional milestone payments at a later date.