Category: M&A

Brazilian president Lula has signed a decree changing local telecom rules, clearing the way for Telemar’s BRL13bn acquisition of Brasil Telecom. The telecom provider also known as Oi announced it would immediately apply for final approval from telecom regulator Anatel, aiming to beat a December 21 deadline and avoid a BRL500m penalty. Telemar CEO Luiz Eduardo Falco told LatinFinance last week that if the decree was signed this week, he was hopeful the deal would be finalized by year-end. The rule change comes 7 months after the two announced the deal and reverses a rule restricting phone companies to one region of Brazil. Separately, Telemar plans to issue up to BRL3.5bn in 2013 debentures to help fund 2009 operations, pending shareholder approval December 9. It does not indicate bookrunners on the issue, which is expected to pay interest at DI plus 4%. Markets await terms on Telemar’s 1-year BRL-denominated bridge facility of some $1.0bn-$1.5bn equivalent early next week, the final piece of the Brasil Telecom acquisition financing.

Brazil’s Lupatech says its BRL16.4m acquisition of Fiberware Equipamento Servicos para a Industria has closed successfully. The deal was first announced in July. According to Dealogic data, this was a cash transaction that was privately negotiated. Lupatech, an iron and steel products manufacturer that trades on the Bovespa, reported revenues of BRL387m in 2007. No banks advised.

Itau and Unibanco have released terms of their proposed merger, to be voted on at a shareholders meeting on November 28. At current values, the proposed share exchange ratio values Unibanco at BRL29bn. The deal boosts Itau Holding’s capital base by BRL12bn to BRL29bn, according to the company statement. Shareholders of Unibanco will receive one common share in Itau Holding for every 1.1797 Unibanco ordinary share and one Itau Holding share for every 3.4782 Unibanco preferred shares they hold. Rothschild provided Unibanco with a fairness opinion while Morgan Stanley gave the same for Itau.

Minera Autlan, the Mexican Manganese miner, is on the lookout for acquisition targets, say company executives. While declining to comment specifically on the strategy for non-organic growth, an Autlan official confirms what he said in September following the company’s decision not to sell itself in an auction to global mining companies – that Autlan would rather be a buyer than a seller. “We’re not closed to new M&A opportunities,” says the executive. “Given the strong decrease in the valuations of companies in the mining industry, Autlan is considering some acquisitions,” says Banif-Ixe, in a late October report. “Targets would include not only manganese ferroalloy producers, but also some other ferroalloy assets. Additionally, it is analyzing whether to buy a mining company or a smelter/refining facility,” adds the shop, noting the company is considering raising around MXP3.5bn for big ticket capex. If that were raised in the debt market, it would imply a net debt to Ebitda of 1.0x, says Banif-Ixe. An Autlan executive declines to comment on specifics, saying funds could be raised in either debt or equity markets, but that today’s market is not conducive to new issues.

Banco do Brasil has agreed to acquire Banco do Estado do Piaui, the state bank of Piaui, for BRL81.7m. BB plans to issue 2.93m shares to finance the acquisition, exchanging 1 unit for 4.60 BEP shares, and has called a shareholder meeting for November 28 to seek approval. BEP has BRL330m in assets. Amid a surprising wave of Brazilian bank consolidation in recent weeks, Banco do Brazil is heard negotiating for Sao Paulo state-owned bank Nossa Caixa and a minority stake of up to 49% in Banco Votorantim. BB could be preparing to offer as much as BRL7bn for each, according to industry officials and local press reports.

Lima-based Derivados del Maiz confirms in a letter to Conasev that the board of its parent company, Corn Products International, has opted to withdraw its support for a merger with White Plains-based agribusiness company Bunge. As a result of the withdrawal, Corn Products will pay Bunge $10m, the letter says. The merger would have had a deal value of about $4.2bn, according to Dealogic, and been paid for in stocks. Lazard advised Corn Products while Morgan Stanley and Credit Suisse advised Bunge, Dealogic data shows.

Fitch has put Unibanco’s BBB rating on watch positive following the announcement of a merger with Banco Itau Holding Financeira (BHIF) to establish the largest private financial conglomerate in LatAm. “Given the realities of the challenging environment, BIHF’s diversification of activities should provide a diversified revenue base sufficient to cushion against potential pressures on asset quality, and allowing internal capital generation,” says Fitch. It adds that while both banks have a track record of successfully integrating prior acquisitions, the magnitude of the proposed merger is far beyond that of past experience, and will present important integration risks, both operational and cultural. The agency also notes potential risk inherent in expanding regionally. “In considering the evolution of its ratings over time, Fitch will consider the potential benefits and pressures that could arise from this potential growth; while both institutions have a well-established track record of effective risk management, the challenges of cross-border risk management on a larger scale could be significant.”

The merger of Itau and Unibanco is set to create an even more formidable local investment banking competitor for the leading foreign-owned shops active in Brazil such as Credit Suisse and UBS Pactual, as well as for growing players Morgan Stanley, Goldman Sachs and Merrill Lynch. With the acquisition, Itau grows its deposits and debentures base by BRL72bn, giving its investment bank additional firing power to support local clients. Named LatinFinance’s local investment bank of the year for the 12-month period through July, Itau BBA has demonstrated it can jostle with the heavyweights when it comes to equities. The shop led five of the six largest equity deals in the period and today stands at the number spot in the region’s ECM league tables with $4.5bn across 6 deals, according to Dealogic. “On the investment banking side, I think this [merged entity] will undoubtedly become the market leader,” says a senior investment banking official at Unibanco, who now runs the risk of losing his post. He adds international houses may see their influences wane as trouble back home continues to brew for Europe and US-based firms. He concludes by saying the universal bank model is fast becoming the preferred format for financial institutions around the globe. In 2008 so far Unibanco ranks fourth in LatAm ECM, having underwritten $1.8bn across two deals, according to Dealogic. In Brazil M&A, Itau BBA ranks fifth while Unibanco is not ranked.