The Latin Business Chronicle in January issued its annual report on M&A in the region. It found: "Overall, the value of M&A deals barely increased, but the number of deals grew strongly. And while announced M&A deals in Mexico fell, they grew in Brazil." Indeed, according to Reuters citing Thomson Financial data in August, Citigroup Inc. was the country's top M&A adviser for 2007 and just eight months into the year had nearly matched its 2006 advisory totals in Brazil. But the effect of the now-global credit crunch has yet to play out.
Perhaps unsurprisingly deal activity has been strong in industries where there has been global consolidation. To get a sense of the deal climate in Brazil, consider some of the biggest transactions involving Brazilian companies in the last calendar year alone:
Most recently, Brazil's Cia. Valo de Rio Doce reportedly raised its offer for Xstrata plc and is willing to pay 45.4 billion pounds, or $88.5 billion for its Anglo-Swiss peer, according to a report in O Estado de S. Paulo Feb. 21. (The target in December acknowledged it was willing to talk about M&A with its peers.)
In November, Houston-based Quanex Corp. unveiled plans to sell its vehicular parts units to Brazilian steel giant Gerdau SA, Latin America's biggest steelmaker, in a deal valued at nearly $1.7 billion.
In July, Telecom Italia exited Brasil Telecom through a 515 million euro ($768 million) sale to three Brazilian pension funds. As The Deal's Phineas Lambert noted: "Telecom Italia also owns TIM Brazil, the second-biggest player in the Brazilian cell-phone market after Vivo Participacoes SA, a joint venture between Telefonica SA and Portugal Telecom SGPS SA. Telefonica is trying to buy out Portugal Telecom, and investors had expected the Spanish giant to make a play for TIM Brasil." And he pointed out in June: "Portugal Telecom SGPS SA opened talks with Brazilian telecom Tele Norte Leste Participacoes SA, also known as Telemar, and may make an offer for the Rio de Janeiro-based operator."
More deals in Brazil's telecom market could be forthcoming.
Grocery retail is another sector that has seen global M&A in recent years. In April, Carrefour SA looked poised to become the No. 1 grocer in Brazil with a deal to pay a reported 2.2 billion reais ($1.1 billion) for Atacadao Distribuicao Comercio e Industria Ltda., the owner of 34 hypermarkets.
And on the energy front, a consortium that included Petroleo Brasileiro SA, Brazil's state-owned oil giant Petrobras and two local partners unveiled plans in March to buy Ipiranga Group, the country's No. 2 oil products distributor and refiner in a $4 billion deal. The move served to further concentrate ownership in petrochemicals and oil products distribution, Mike Kepp wrote for The Deal at the time.
For 2006, energy deals topped the M&A activity in Latin America and were followed by technology deals, finance, metals and mining, as Latin Business Chronicle noted. - Carolyn Murphy