M&A UPDATE – BRAZIL
By – Alexandre Leite Ribeiro do Valle – Article – 2010
M&A market in Brazil is passing through a special and at the same time delicate moment in this first semester of 2010. Special because the economy is still booming (a recent report from Brazilian Official Institute of Geography and Statistics “IBGE” shows that Brazil has experienced the second higher growth of GPD in the world for the first semester of 2010) and the value of trades is higher than ever seeing, mainly in the Etanol and Agribusiness’ sector, where foreign companies are specially interested resulting in an increase of foreign direct investment from 7% to 20%.
The numbers are impressive and according to a recent research 22 transactions were held in the first quarter of 2010, amounting almost 23,5 billions of Reais. Brazilian companies are also consolidating themselves as purchases in the domestic and external market. The estimative is that 50% of the transactions held this year were internal transactions.
On the spots, the acquisition of Bunge’s fertilizations assets by Vale concluded on 27 May 2010, by which Vale has acquired 58,6% of direct and indirect share participation in Fosfertil, a company duly listed ad São Paulo Stock Exchange, and other assets from Bunge in a transaction involving US$ 4.7 bi. According to Brazilian legislation in force, Vale is now required to promote a public offer, under the terms of law number 6.404/76 and normative instruction 361 from Brazilian Securities and Exchange commission to acquire the remaining ordinary shares of the company for the same value paid to the former controllers of the acquired company.
Amongst other transactions, the acquisition of Quattor by Braskem evaluated in R$ 700 mi also deserves note and includes an investment agreement with Petrobras and Unipar leading Brasken as the biggest petrochemical industry in the Sector of Thermoplastic resins.
Notwithstanding all this impressive numbers, from the regulatory perspective, governments seems to figure as special spectator, looking market development without pushing the necessary regulatory reforms forward. In this regard there are a number of bills of laws and regulatory changes initiatives that remains on paper for long time.
In this regard, one of the main expected changes is the approval of bill of law number 3.973 proposed in 2004 aiming to modernize Brazilian anti-trust system, bringing it to the international standard is still jeopardize in congress.
Another relevant development being expected is the issue of a new regulation from the Brazilian Stock Exchange Commission regarding public offering in order to amend Normative Instruction 361 dated 2002, which is now subject to public hearing postponed to 09 July 2010. The amendments proposed are based on European Directive on takeover bids number 2004/25/CE in order to establish better controls and transparency on bind and voluntary public offers and its background information.
The author remain available for any clarification on the above.