Category: M&A

Vale has agreed to acquire mining and surface rights owned by fellow Brazilian Mineracao Apolo for $145m. The purchase includes 1.1bn metric tons of iron ore located in the state of Minas Gerais. Vale will fund the acquisition using its own resources, a spokeswoman says.

Mexico-based FEMSA, the major regional beverage firm, is on the acquisition trail, potentially beyond LatAm. The firm is establishing a small beachhead in Colombia this year of 20-30 stores, a strategy it will fine tune over the next 1-2 years, FEMSA CFO Javier Gerardo Astaburuaga Sanjinés tells LatinFinance. FEMSA is using the foray to prove its retail model can be used outside Mexico, with an eye to eventually expanding outside LatAm, adds Astaburuaga, who is also vice-president for strategic development. The firm has very low leverage, at close to 1x net debt to Ebitda. Astaburuaga concedes that there may be some inefficiencies associated with such ratios, but he sees strategic value in being flexible and able to pounce on any attractive purchase when it arises. “In the case that we acquire something outside Latin America . . . we will look at local markets,” says Astaburuaga, speaking of the financing strategy. He adds that Europe and Asia are potential locations for expansion.

The long anticipated acquisition of Brasil Telecom (BT) by Telemar’s Oi, announced Friday, sets the stage for jumbo M&A financing that could exceed BRL16bn in size. Oi agreed to buy the equity in BT for BRL5.86bn. But it is heard having to shell out an additional BRL11bn to cover all of its subsidiaries’ debt and equity, including minority shareholders in those entities. Telemar is meanwhile narrowing down a list of lenders on a facility said last week to be in the BRL16bn size area, according to bankers. The company will seek to raise as much as possible in local currency, providing an interesting data point for BRL syndicated lending, which remains undeveloped. According to a statement filed with the CVM, Credit Suisse is the buyer of record for 100% of the shares in Invitel, the holding company that controls BT. The investment bank is also acting as an endorser and intermediary for Telemar in the deal, says the contract. Credit Suisse advises Oi while Citi is working with BT.

Brascan Residential Properties has completed the acquisition of Brazil’s MB Engenharia for at least BRL164m. The real estate company controlled by Canada’s Brookfield Asset Management will pay BRL24m cash to MB shareholders, and at least another BRL140m in 2011, depending on cash flow generation. Brascan aims to tap housing markets in MB’s stronghold in the country’s center-west region. Banco Brascan advised Brascan on the transaction, and Credit Suisse and Unibanco advised MB. Separately, Brascan’s board approved a buy back of up to 7.4m of its shares, authorizing up to BRL110m for the operation.

Brazil’s Telemar is summoning relationship banks to put together a BRL16bn acquisition facility. The company, whose subsidiary Oi is making progress with discussions for the acquisition of Brasil Telecom, is heard to have narrowed a short list of potential bookrunners down to eight. And it is seeking to denominate as much as possible in local currency, which one banker believes could account for well over half the total. Such a large BRL facility will test the depth of the local loan market and foreign banks’ willingness to take FX risk. A banker close to the process estimates the financing commitment will be for the full BRL16bn, but that the actual facility may vary in size depending on the availability of other markets such as local debentures and cross border bonds. Tenors and pricing are still being decided. Known relationship banks for Telemar include Santander, ABN AMRO, Citi, Calyon, Societe Generale and JPMorgan as well as locals Banco do Brasil, Itau, and Bradesco. Legal shareholder disputes between investors in the companies, including Citi and Rio-based asset manager Opportunity, have delayed the acquisition process.

Oi has not completed a merger with Brazil Telecom, according to an official at the Brazilian telecom, who rejects local press reports to the contrary. There have been no advances since March 28, when the company announced that it was in talks with Brasil Telecom shareholders. Agencies also reported Friday that an ongoing legal battle between Citi and Brazilian fund manager Opportunity could threaten the merger of the two telecoms. The two entities, along with a group of Brazilian pension funds, control Brasil Telecom. Citi has sued Opportunity for $300m, according to the press reports.

Brazilian dairy foods giant Perdigao announced Tuesday the purchase of Cotoches, a milk processing company in Minas Gerais, for BRL54m and the assumption of BRL15m in debt. The acquisition is part of Perdigao’s expansion plan in the local market, the company says. An additional BRL30m will be invested to upgrade Cotoches’ factories into Perdigao’s food safety and quality standards.

LatAm M&A bankers may be crying over the demise of Vale-Xstrata – which could have added $90bn to the year’s volume – but they are doing much better than their peers in other markets. First quarter targeted volume was $25.86bn from 203 transactions, up 39% year-on-year in volume terms, according to preliminary data from Dealogic. This compares to a 40% decline in global M&A to $652.6bn in 1Q 2008, the lowest since Q1 2004 ($557.3bn). “While volume has decreased, deal count was up 4% from 1Q 2007 driven by deals between $100m and $1bn, now accounting for 40% of global volume, up 13 percentage points from Q1 2007,” says Dealogic. EM targeted M&A activity meanwhile rose 3% year-on-year, to $169.4bn. This was 34% less than in Q4 2007. EM volume was 26% of global M&A volume, up 11 percentage points from Q1 2007 and the highest start to a year on record. “Acquisitions by EM companies into developed markets accounted for 30% of total EM acquirer M&A volume ($50.2bn via 221 deals), up 86% from in Q1 2007 ($26.9bn via 127 deals),” says Dealogic.

The Bovepa and the BM&F, which yesterday announced a merger of equals, seek to become an even bigger LatAm exchange by alliance or acquisition. A new holding company, provisionally called Bolsa Nova, will house the Bovespa and BM&F brands and is expected to have a market cap close to $20bn, making it the second largest exchange in the Americas. Bolsa Nova’s subsidiaries will cover the full range of tradable assets available in LatAm including currencies, commodities, derivatives, fixed income, equity and equity derivatives. The merged exchange seeks to establish a new role as a trade forum serving more than just Brazil. “The idea is to create regional consolidator,” says Marco Goncalves, head of M&A for Brazil at Credit Suisse, which advised Bovespa on the union. The new entity will look to set up specific agreements or make outright acquisitions of other exchanges in the region. One of the most obvious candidates is Mexico’s Bolsa, with which the Bovespa was previously in talks to set up a trading agreement for local investors to buy and settle offshore. The BM&F has also expressed an interest in a linkup with Argentina’s Bolsa de Comercio de Rosario, which trades commodities. Rothschild advised the BM&F on the transaction.