HIGH END OF YEAR IN M&A ACTIVITY IN CHILE AND COLOMBIA, WHILE PERUVIAN MARKET DEALFLOW WAS MINIMAL
DURING DECEMBER, THE CHILEAN AND COLOMBIAN M&A MARKETS WERE DYNAMIC, CLOSING A YEAR WITH SUBSTANTIAL ACTIVITY. IN CHILE, THE MAIN TRANSACTIONS OCCURRED IN THE LOGISTICS AND FOOD INDUSTRIES, WHILE IN COLOMBIA MINING AND INDUSTRIAL SECTORS STOOD OUT
In Chile, a variety of transactions took place during the last month of the year. Empresas Copec, through its subsidiaries, completed the purchase of Blue Express for a total value of US$ 250 million. Empresas Copec is a Chilean holding company that has operations mainly in the forestry, energy, fishing, mining and real estate industries. The closing was completed following the approval of the FNE, which was granted on December 20th. Blue Express, a provider of logistics services for e-commerce and courier services, is one of the four largest logistics companies in Chile, along with Starken, Correos de Chile and Chilexpress. The main controller of Blue Express prior to the transaction was a private fund, which bought the company in 2019 from Grupo Bethia.
A major capital raise that took place in the food industry was a US$70 million financing round closed by The Not Company (NotCo), the Chilean plant-based foodtech that achieved a unicorn valuation in July 2021. The recently closed series D round was led by Princeville Capital, and Mercado Libre’s founder Marcos Galperin. The funds raised will be used primarily to license NotCo’s patented artificial intelligence technology which will enable other companies and brands to access this platform and develop their own plant-based food products. This business unit will have a B2B format, and will allow ingredient suppliers and food manufacturers to have access to Giuseppe, NotCo’s algorithm used to create new food products based on plants and plant-based ingredients. By these means, the company will continue developing and strengthening the partnerships it has with other chains and brands, such as Kraft Heinz, Burger King, Starbucks, in addition to driving the growth of the plant-based food industry and encouraging the entry of new players into the sector.
An important announcement also made in December was the public tender offer announced by an affiliate of the Canadian pension fund, Public Sector Pension Investment Board (PSP), to achieve between a 36% and 49.9% total stake of Hortifrut’s share capital. The price offered by PSP was US$ 1.63 per share, leading to a US$ 290 million – US$ 420 million transaction, depending on the stake acquired. PSP currently has a 4.88% stake in Hortifrut and, if the tender offer is successful, it would become the second largest shareholder in the company, after the Controlling Group. This transaction is expected to materialize within the first four months of 2023, conditioned on PSP achieving at least a 36% stake in the company. PSP is one of the largest pension administrators in Canada, while Hortifrut is a leading company in the production and distribution of berries, whose business model is based on strategic alliances through commercial platforms and own brands, integrating the entire value chain until reaching the end customer.
In the Colombian M&A market, one of the completed transactions during the month of December was the acquisition of Pegaucho by Preflex. Pegaucho is a Colombian company that has been participating in the market for more than 70 years, and has a presence in various countries in the region. It is a manufacturer and distributor of adhesives and related products for the footwear, textile, wood, upholstery, and construction industries, among others. The Preflex Group is also a co-owner of Pinturas Algreco, and therefore also participates in the paint sector. This acquisition will generate significant growth opportunities and multiple operating synergies with immediate effect and will consolidate its presence as a regional market leader in the manufacture of adhesives, in addition to expanding its coverage in the region.
Another transaction that was announced during the last month of the year in Colombia was the agreement to sell the Alacrán gold project to the Chinese mining company Jchx Mining Management. Cordoba Minerals, owner of the Alacrán project, reached a strategic agreement with Jchx Mining Management, in which the latter will purchase a 50% stake in CMH Colombia for US$100 million. CMH Colombia owns the Alacrán gold project, and will be the joint venture vehicle between Cordoba Minerals and Jchx Mining Management. Thus, upon completion of the transaction, Cordoba Minerals and Jchx Mining Management will be co-owners of the Alacrán gold project, both with a 50% interest. The total amount of the transaction will be paid in three milestones; the first, of US$40 million, will be paid during the first quarter of 2023. The second milestone, also of US$40 million, will be paid once the project completes the respective governmental and environmental permits required for this type of operation. The third and final milestone, of US$20 million, will be paid once the project obtains the Environmental Impact Assessment approval, which should occur within a maximum of two years from the closing date of the transaction.
In Chile, the most active industries during the month of December were the logistics sector and the food sector, while in Colombia the most dynamic industries were the industrial and mining sectors. In Peru, the political and social environment may have contributed to reduce the level of M&A activity in the country.
During 2022, the M&A industry was active in Chile, Colombia and Peru, with significant transactions completed and announced in these three countries. The industries that saw the most numerous and large transactions during the year were energy, automotive distribution, finance and logistics sectors, with energy representing 22.2% of the total transactions announced and completed during the year, while the financial sector amounted to 15.3%, automotive distribution a 11.9% and the logistics sector a 7.5%. The four largest transactions in the region, which surpassed US$ 1,000 million, occurred in Chile: Inchcape’s business combination with Derco; the sale of Enel’s energy transmission assets; the purchase of shares in Scotiabank Chile, previously owned by the Said economic group, by the controlling shareholders of the bank; and the acquisition of 100% of the shares of SAAM Ports and SAAM logistics, and thereby the entire company’s terminal business and associated logistics services, made by Hapag-Lloyd.
Investors came from diverse geographies such as Europe, North America and Latin America itself. Chile and Colombia saw a broad variety of investors, with local and foreign strategic companies seeking to invest in consolidated companies, but also regional financial players such as venture capitals or family offices betting on technological growth startups. Peru, in comparison, had various Canadian investors from the mining industry that were very active during the year. The dynamism observed in 2022 with this high number of transactions is expected to continue in 2023, with international investors closely following and monitoring the political, social and economic developments that may occur in the region. Nonetheless, 2023’s global economic outlook projects a financial environment with higher rates in which the cost of financing becomes more expensive, and therefore, scarcer. Industries such as energy or infrastructure, whose investments require high levels of leverage, are more likely to see a reduction in the amount of leverage, increased project financing rates and debt coverage ratios. Therefore, some liquidity contraction is to be seen during the following year.