Brazilian private equity firm GP Investimentos has had a spectacular time of it. The firm recently closed its fourth fund on $1.025 billion. It was the first in Latin America to surpass the $1 billion mark. Just under a month later, the firm agreed to buy Pride International's Latin American Land Drilling and E&P Services business for $1 billion in cash, in the region's largest buyout to date.
The firm's new fund will contribute $100 million of the deal's $400 million equity component, although the contribution may be syndicated with co-investors, who have already committed $150 million to the deal.
The deal is important for several reasons. It is the firm's first investment in the oil and gas sector, which is growing rapidly in Latin America. The deal will give GP Investimentos control of 73 land drilling rigs, 135 workover rigs and two lake drilling barges in eight Latin American countries.
We see this as a company that has great long-term potential for us,” said the firm's co-chief executive, co-chairman and president, Antonio Bonchristiano. He added that the company will be an excellent platform for organic growth as well as add-on acquisitions.
The deal also marks the first time GP Investimentos has used leverage to finance a deal. Leverage is an option that economic volatility in the region has long made difficult, but 60 percent of this deal will be financed by a special purpose vehicle.
special purpose vehicle. “Bank financing is now available for acquisitions in Latin America, particularly in Brazil, and that was not the case before,” Bonchristiano said.
Just four days after the Pride deal, GP Investimentos signed another substantial transaction: the $642 million acquisition of Magnesita, Latin America's largest refractory materials producer. It is planned that nearly half the deal will be financed by debt.
The investments in pan-Latin American companies also represent the first manifestation of GP Investimentos' goal to expand outside of Brazil, both in terms of physical office presence and investments. The firm has the freedom to spend up to 25 percent of the new fund in non-Brazilian companies, and Bonchristiano said it intends to use the full allowance.
TEACHERS' BUYS THIRD CHILEAN WATER OPERATOR
The Ontario Teachers' Pension Plan has agreed to acquire Chile's third-largest water operator, Esval, from banking and insurance company Consorcio Financiero. The pension plan has already agreed to pay $365 million for 48.92 percent of Esval, and plans to launch a tender offer for all of Esval's remaining shares, in accordance with Chilean securities law. Earlier this year, the pension plan bought Aguas Nuevo Sur Maule, and took a 50.1 percent stake in Empresa de Servicios Sanitarios del Bio-Bio in advance of a tender offer for the remaining stake. “We like infrastructure investments, such as water utilities in regulated industries,” said a spokeswoman for the pension plan. “They provide reliable returns at a low level of risk, and can withstand economic downturns better than other types of investments. They also tend to keep pace with inflation, which is ideal for a pension plan like ours that is indexed to inflation.”
BUYOUT BOOMThe rapid growth of Latin American buyouts can be seen in the table below. The value of buyouts in 2006 was around four times that recorded in the year prior. This year, the total has already comfortably outstripped last year's.
IFC INVESTS $10M IN PERUVIAN ENERGY COMPANY
The International Finance Corporation (IFC), the lending arm of the World Bank, has made an equity investment of $10 million in Maple Energy, a Peruvian energy company with oil, gas and alternative fuels operations. The IFC said its investment will help the country to meet its energy needs as well as support the growth of an alternative fuels market – Maple is developing a sugar cane-based ethanol production project in the northern Piura region of Peru. The project will be the first large-scale ethanol production facility in the country, and will also boost the country's agricultural sector, the IFC said.
STRATUS PORTFOLIO COMPANY BUYS FINANCIAL SOFTWARE FIRM
Senior Solution, a portfolio company of Brazilian firm Stratus Venture Capital and the Brazilian National Development Bank, has acquired Intellectual Capital, a Brazilian investment fund management software maker. Terms of the deal were not disclosed. Senior Solution said in a statement the merger will help it to expand its product offerings, and possibly pave the way for an initial public offering on Bovespa next year. Intellectual Capital is Senior Solution's fourth acquisition in three years. In 2004 it acquired NetAge, a financial markets solutions developer; in 2006 it bought Pulso, an electronic transactions software provider; and in June this year it acquired Impactools, a life insurance and social security solutions provider.
FORMER INTEL CAPITAL EXEC JOINS STRATUS GROUP
Carlos Kokron, formerly of Intel Capital, has joined Brazilian private equity firm Stratus Group as managing director to lead its venture capital practice. Kokron spent five years building Intel's Latin American operations based in Sao Paulo, before taking over the firm's Southwest US division, his most recent role. At Stratus, Kokron will work on broadening the firm's venture capital investor base. To date, Stratus has $100 million (€73 million) invested in venture capital; in the next three years, Kokron said he hopes the firm will have $300 million under management.
GENSPRING ACQUIRES INTERNATIONAL MULTI-FAMILY OFFICE
Just days after changing its name, GenSpring Family Offices has acquired TBK Investments, a multi-family office that manages the assets of than 60 families in Latin America and Southern Europe. Terms of the deal were not disclosed. For the past 20 years GenSpring was Asset Management Advisors, but earlier this week the firm changed its name to reflect its “focus on sustaining generational wealth for families”, GenSpring said in a statement. The latest acquisition will result the formation of a complementary office: GenSpring International. Santiago Ulloa, who founded TBK in 2000, will become president of GenSpring International after the deal closes. In that role he will work with the office's international clients, and develop new international business. GenSpring has $12 billion (€8.7 billion) in assets under management for 420 families, and the merger will add another $1.5 billion. Roughly 40 percent of GenSpring's assets is allocated to alternatives. The advisor recently established a private equity team and held two first closes on its first-ever private equity vehicles, a fund of funds and a co-investment fund. Upon their final close, expected in the third quarter, they will together total about $100 million.
DEG BACKS RENEWABLE ENERGY FIRM
DEG, the developing countries investment arm of Germany's KfW Bankengruppe, has invested $25 million in equity for an undisclosed stake in Brazil's Energias Renováveis, a holding company that owns projects in the fields of hydropower, biomass and wind. The company is planning to build more than 30 power stations by 2015. The company will initially focus on smaller hydropower stations and has already secured the rights to 16 such projects. In a statement, DEG said it would contribute to the company's compliance with international environmental and social standards and would also advise the business on the purchase of carbon credits.