The Chilean and Colombian markets remain active with M&A activity and capital increase transactions in many sectors of the economy, especially in the energy, logistics, infrastructure and telecommunications industries. However, transactions in Peru have decreased during October. The political situation in all three countries has affected deal flow and motivation to sell.

Among the transactions in Chile, Sonnedix, a global renewable energy developer, builder and operator, completed the acquisition of the ARCO I (219 MW) and ARCO II (80 MW) portfolios. The seller, Arroyo Energy, is a company owned by Arroyo Investors, created to pursue investment opportunities in the Chilean renewable energy generation markets and is one of the largest independent power producers of renewable energy in the country and invests in energy infrastructure projects throughout the U.S., Mexico and Chile. Its main investments focus is on both conventional and renewable power generation and related infrastructure, including natural gas transportation and storage, energy storage and fuel logistics. With this acquisition, Sonnedix expands its role in the energy transition to a total installed capacity of 1GW in Chile and 7.4 GW globally.

Another relevant transaction is the merger between Claro Chile and VTR which was recently approved by the Fiscalía Nacional Económica (FNE). Claro Chile and VTR are two leading telecommunications companies in the country and this merger will lead to the creation of a new firm that will combine their business lines in various segments such as pay TV and fixed line telephony, among others. However, the approval by the FNE is conditioned to a series of mitigation measures which seek to reduce the risk of excessive market concentration. Among the measures requested by the FNE are the return of two 10MHz blocks to the government, as well as the creation of a fiduciary agent to transfer Claro Chile’s digital TV business. With this transaction, the new company expects to generate benefits for consumers by offering a broader access and coverage of its services throughout the country.

Among the major announced transactions during October was the corporate restructuring acquisition of SAAM’s port terminals and logistics operations by Hapag-Lloyd (SAAM is indirectly related to HL) for approximately US$ 1 billion. SAAM, the seller, is a Chilean multinational company linked to the Luksic Group that provides maritime transportation services through port terminals, tugboats and logistics. Hapag-Lloyd is one of the world leaders in container shipping and specializes in refrigerated cargo, dangerous goods transportation and special cargo projects. The agreement involves the sale of ten port terminals across seven countries in the Americas, as well as offshore warehouses and integrated logistics operations for importers and exporters. With this operation Hapag-Lloyd seeks to expand its area of operation and also intends to continue strengthening its tugboat business given the great prominence that SAAM has in this area. This transaction is still subject to compliance with regulatory authorizations.

A second important transaction is the announcement by Engie to acquire its first wind power plant in southern Chile for US$ 77 million. The purchase agreement involves the San Pedro I wind farm, with an installed capacity of 36 MW, San Pedro II with an installed capacity of 65 MW and a project under development with an installed capacity of 151 MW, totaling a portfolio of 252 MW. The San Pedro I and San Pedro II plants are in the operational phase. The French multinational Engie operates in areas associated with energy transition, electricity generation and distribution, natural gas, nuclear energy, renewable energies and oil. The purchase agreement is subject to suspensive conditions, including the approval by the FNE.

Another announced transaction in the renewable energy sector, is the acquisition of the Luz del Norte Photovoltaic Solar Park by Toesca Infraestructura II, an investment fund managed by Administradora General de Fondos Toesca. The solar power plant is located in the Atacama Region and has an electricity generation capacity of 141 MW. Toesca, the buyer, is one of the leading independent alternative investment managers in Chile.

Lastly, in Chile, Entel announced the sale of its domestic fiber optic assets to a company controlled by KKR and Telefónica Chile for US$ 358 million. Both Entel and Telefónica Chile are among the country’s leading telecommunications companies, while KKR is a U.S. global investment firm that manages various types of alternative assets and has assets under management (AUM) of more than US$ 470 billion. KKR and Telefónica Chile made the purchase through their joint-venture OnNet Fibra, in which KKR and Telefónica Chile hold 60% and 40%, respectively. The announced transaction involves 1.2 million fiber-optic real estate units and is expected to create a robust fiber-optic infrastructure network for the benefit of OnNet Fibra’s customers. The transaction is subject to approval by the FNE.

The Colombian M&A market showed intense activity during the tenth month of the year. An important transaction completed during October was the purchase of Clínica Chía by Avidanti, one of the main hospital providers in Colombia, which is controlled by the Brazilian alternative investment manager, Patria Investimentos. Clínica Chía is a medical institution that has been able to attain significant growth and development in recent years. It has more than 20 years of experience in the health sector and locations in 8 municipalities. After the acquisition of Clínica Chía, Patria Investimentos will continue with its investment thesis and commitment to expand their presence in the health sector throughout the Andean region.

Another important transaction in Colombia was the capital increase of Foodology for a total of US$ 50 million. The company’s business model consists of developing and scaling restaurant brands that operate under “dark kitchen” concept, a format in which restaurants don’t have a physical location to service customers, but rather specialize in preparing and delivering food to clients exclusively through home delivery. Today, the startup has 80 dark kitchens operating in Colombia, Mexico, Brazil and Peru, and has set a goal of reaching 100 dark kitchens by the end of the year. The capital increase consists in US$ 50 million, of which US$ 30 million corresponds to debt granted by TriplePoint Capital, a fund specialized in providing financial loans to growing companies. The remaining US$ 20 million consist of an equity increase in which investors such as Andreessen Horowitz, Wollef and Kayyak Ventures participated.

Finally, during the last days of October, the Colombian Financial Superintendency (SFC) approved the tender offer launched by IHC Capital Holding (IHC) to acquire 25-31.25% of the shares of the leading food processing conglomerate Grupo Nutresa. Based in the United Arab Emirates, IHC Capital is one of the leading financial holding companies in the Middle East, with equity stake in more than 350 companies globally and present in multiple industries such as shipping, agriculture, infrastructure and healthcare. The tender offer launched by IHC seeks to acquire between 25% and 31.25% of Grupo Nutresa’s shares, at a purchase price of COP 72,328 per share (US$ 15), considerably higher than the closing price of COP 53,010 (US$ 11) of Nutresa’s shares in the Colombian Stock Exchange. Depending on the final percentage to be acquired by IHC Capital, the amount of the transaction could range between US$ 1,716 m and US$ 2,146 m. Nutresa’s main shareholders are Sura Group with a 35% stake, followed by Nugil with 31% ownership, Argos with 10% and a free float in the stock market of nearly 17%. In order to achieve the minimum acquisition percentage that the tender offer seeks to accomplish, the operation launched by the Middle Eastern group will depend on the willingness of the main shareholders in selling their participation in the company.

M&A transactions in Peru during October did not show a higher level of activity compared to the rest of the year. A relevant transaction announced during this month in the Peruvian market was the purchase of Hersil Laboratorios assets by Pharmaceutica Euroandina, an entity linked to Medifarma. The buyer is a Peruvian laboratory which is among the 3 largest laboratories in the country, with presence in Uruguay, Ecuador and Brazil. With this acquisition, Medifarma continues to increase its presence in the region in accordance with its proposed expansion plan. Hersil Laboratorios is a Peruvian laboratory focused on the manufacture and marketing of pharmaceutical and natural products, as well as clinical research and the provision of local and international services. In order to avoid market concentration in the pharmaceutical industry, the National Institute for the Defense of Competition and the Protection of Intellectual Property (INDECOPI) established that Pharmaceutica Euroandina will have to license to a third party three of the brands currently marketed by Hersil.

During the tenth month of the year, M&A transactions in the Andean region have taken place in the energy, infrastructure and telecommunications sectors in Chile, healthcare in Peru, and the continuity of capital increase operations and tender offers in Colombia. The uncertainty that the political scenario presented during the year already seem to have stabilized. Foreign investors continue to show signs of interest in the region, both in natural resource assets and infrastructure development opportunities in Latin America’s main economies. Towards the end of the year, the changing macroeconomic environment, global inflationary pressures and exchange rate volatility will remain in consideration. These variables are key factors that will affect future investment decisions.

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