After years of little dealmaking in Argentina, Pampa Energía was among the first local companies to take advantage of the dramatic shift in the business climate under President Mauricio Macri. Just a few months after Macri came to office, Pampa bought a controlling stake in Petrobras Argentina.

It was timely play for Argentina’s largest electricity company. The complex deal to buy the 67% stake in Petrobras’ Argentine business for $892 million expanded Pampa’s energy assets at a time of growing demand in South America’s second-largest economy. 

“The acquisition was a milestone for Pampa and completely changed the outlook of our company,” Pampa chairman Marcelo Mindlin says. “We were acquiring a company that was bigger than ours, with a very appealing and unique set of assets, which fit perfectly with our strategy to grow in the production of natural gas in Argentina.”

For Brazil’s Petrobras, the sale was one of the first in its aggressive asset sales program to reduce debt and get out from under a massive bribery scandal.

The resulting deal, executed in July last year, proved a boon for Pampa. It helped the company double its gross net assets and nearly double its share price in 12 months. It strengthened the company’s position in one of Argentina’s most important sectors, with strong growth potential as the economy rebounds. It also makes Pampa the winner of LatinFinance‘s award for Corporate with the Best Regional M&A Strategy.

Pampa beat out other bidders to complete the transaction, including one from Argentina’s state-owned energy company YPF, but it also showed considerable financial dexterity to get it done.

To help pay for the acquisition, Pampa used a $600 million bridge loan. Citi and Deutsche Bank were the lead joint bookrunners on the loan, with Banco Galicia, Crédit Agricole and ICBC mandated as lead arrangers. But to move ahead, Petrobras Argentina had to address its own debt issues and issued a $500 million 7.375% 2023 bond to pay for the buyback of $300 million of its 2017 paper.

Pampa offloaded its 50% stake in the local natural gas supplier Transportadora de Gas del Sur (TGS) to comply with competition rules, selling it for $241 million to investment groups led by Argentina’s Sielecki and Werthein families.

Mindlin says political developments in both Argentina and Brazil also set the tone for the Petrobras transaction.

“Timing was a key issue for the success of the transaction,” he says. “Not only were we in the middle of the change in government in Argentina, but [former President Dilma Rousseff’s] impeachment was taking place in Brazil. From the very beginning we decided to act quickly and complete the transaction as fast as possible.”

Mindlin does not rule out more potential acquisitions. “We are always looking for new opportunities to grow the business, not only through acquisitions but also by developing our own assets,” he says.

“At Pampa, we are mostly focused on developing our natural gas reserves and expanding our electricity generation capacity,” Mindlin says. “But as our history shows, more acquisitions could come in the near future.” LF