THE ANDEAN REGION MAINTAINS MODERATE M&A LEVELS OF ACTIVITY IN JUNE 2023
M&A ACTIVITY IN JUNE CONTINUES THE SLOWDOWN SEEN IN THE EARLIER MONTHS OF 2023. MINING AND ENERGY SECTORS ARE THE MOST ACTIVE, FOLLOWED BY MEDIA, REAL ESTATE AND FOOD & BEVERAGE
In Chile, the renewable energy sector saw an interesting transaction announced by AES Andes; the company acquired Bolero solar plant for US$ 112.7 million. The plant is located in the Atacama Desert in Chile’s Antofagasta Region, which enjoys some of the highest irradiation levels in the world. The project has an installed capacity of 146 MW and includes the electrical substation Laberinto. AES Andes is one of the most important power generators in Chile, with renewable assets in solar, wind, mini hydro, among others, with a total installed capacity of 3.8 GW. The selling parties were EDF Renewables Chile, Chilean subsidiary of EDF, a world leader in renewable energies, storage and energy efficiency, together with Marubeni Corporation. Part of the total consideration will be used to reduce financial debt, while the remaining portion will be used to purchase shares of the entities that own the project. Additionally, the sale of the Bolero solar project is part of a broader, strategic asset reorganization by EDF Renewables in Chile aimed to optimize their renewable energy portfolio in the country.
Also in the energy sector, but specifically within the hydroelectric subsector, Spanish fund manager Qualitas Energy completed the acquisition of a Chilean hydroelectric plant. Qualitas specializes in renewable energy, energy transition, and sustainable infrastructure. Even though specific details about the transaction were not disclosed, it is noteworthy to mention that this transaction represents a starting point for this fund in Chile, as it is the first asset acquired by Q-Energy in the country. This comes after their announcement that they had recently opened offices in the country, a strategic move that demonstrates their commitment to the Chilean market. Besides hydro, the company plans to broaden its focus to encompass solar, wind, and storage technologies.
In the mining sector, Osisko Gold Royalties completed the acquisition of a 1% net smelter return royalty on copper and a 3% net smelter return royalty on gold from Hot Chili’s Costa Fuego project for US$ 15 million. The Costa Fuego project, focused on copper and gold extraction, is situated in Chile’s Atacama Region and is one of the world’s largest undeveloped copper projects not currently controlled by a major mining company. Hot Chili, the project’s developer and manager is an Australia-based mining company focused on the exploration and development of copper projects in Chile, with a market capitalization of around US$ 100 million. On the buy side, Osisko is a Canadian-based precious metals royalty intermediary, primarily operating in the Americas. It owns a North American portfolio consisting of over 180 precious metals royalties, streams, and precious metal offtakes.
Also in the mining sector, Ceibo, a company focused on technological development in mining, has closed a capital increase of US$ 30 million. Ceibo is a Chilean company specializing in industrial biotechnology with the goal of enhancing the sustainability of mining-related production processes. They offer a proprietary solution designed for the significant reduction of dust emissions. These dust particles, also known as suspended particulate matter, are a common byproduct in the operation of vehicles essential to the mineral transport and hauling fleet. The capital round corresponds to a Series B and was led by Energy Impact Partners, a global venture capital firm with over $3 billion in assets under management (AUM), which invests in companies developing innovative solutions to decarbonize the global economy. Funds such as CoTec Holdings, Audley Capital, Orion Resources, and Unearth were also involved, along with other private investors. The funds raised will be used by Ceibo to accelerate the expansion of its proprietary technology. This includes conducting various on-site trials to validate the effectiveness and versatility of the technology on a large scale. Moreover, the company plans to use this capital to hasten its global deployment plans, aiming to meet industrial and environmental needs on a global scale.
In Colombia, the Gilinski Group announced that its wholly owned subsidiary, Grupo Semana, signed a Memorandum of Understanding to acquire El Heraldo, a leading Colombian newspaper with over seven million subscribers and sales of approximately US$ 6 million. Grupo Semana currently ranks fourth in terms of newspaper revenues in Colombia. The media group has also established itself as one of the largest digital media outlets in the country. With the purchase of El Heraldo, Gilinski would take over the newspaper’s production plant and brand, marking its third acquisition of a media platform in less than three years. The conglomerate has started an aggressive acquisition plan; last month it acquired Nutresa from Grupo Empresarial Antioqueño (GEA), Colombia’s largest business group, but in order to do so, Gilinski Group had to sell stakes in Argos and Sura, two important companies in its portfolio. Now, the Gilinski Group is poised to continue with M&A activity in the country; this month, it presented an offer to acquire the leading Colombian retailer Almacenes Exito for US$ 836 million, but was turned down by its controlling shareholder Grupo Pan de Azucar (GPA), which in turn is controlled by Groupe Casino.
In the food industry, Grupo Bios announced they would acquire Comercializadora Internacional Antillana (CI Antillana), a leading Colombian fishing exporter that engages in fishing activities and retail trade of seafood products. Its main business is the export business, where CI Antillana exports lobster to the United States and France. Among its assets are two processing plants: one in the Caribbean islands (San Andres), which supports fishing operations and local consumption; and the other in the Caribbean mainland (Cartagena), where domestic and imported raw materials are processed, with a deep-freezing capacity of up to 10,000 kilos per day, to serve the domestic and export market. Grupo Bios is a business conglomerate that engages in the agriculture and food processing industry through its subsidiaries. With the transaction, Grupo Bios will benefit from CI Antillana’s well-positioned brand with a presence in retail and institutional channels, including restaurants and hotels.
In Peru, the local private equity firm AC Capitales and family-owned holding company GR Holding announced the joint acquisition of the car park and valet parking business line of Los Portales. The latter is one of the country’s leading real estate developers and operators of car parks, housing projects and hotels with consolidated revenues of over US$ 276 million in 2022. Los Portales signed an agreement whereby an approximately 85% stake in the car park business line will be transferred to three infrastructure funds of AC Capitales once documentation closing conditions are met, while the remaining 15% will be sold to GR Holding. AC Capitales operates as a local asset management firm focused on real estate and infrastructure projects. GR Holding, on the other hand, is part of the Peruvian family-owned holding company Grupo Raffo, which manages a diversified investment portfolio, mainly in real estate, parking, mining and hotel businesses in the country.
In the Peruvian mining sector, American Lithium Corp agreed to transfer a controlling interest in its Macusani uranium project to Friday’s Dog Holdings, a company whose current business is the sale of dog food. For the transaction to be completed, Friday’s Dog Holdings will need to complete a spin-out of Friday’s Dog Inc., comprising the existing business of the Company, to its shareholders. Afterwards, Friday’s Dog Holdings will be renamed as International Uranium and will reconstitute its board of directors to incorporate American Lithium’s nominees. The Macusani project is one of the largest undeveloped uranium projects in the world and has the potential to be a low-cost source of uranium. The former operator, American Lithium, is a US company engaged in the development of large-scale lithium projects throughout the Americas. This transaction marks International Uranium’s transition from a luxury packaged dog food company to a world-class mining company. By acquiring an interest in the uranium project, International Uranium will instantly benefit from the project’s operations, drilling permits and metallurgical technology.
During June 2023, the Andean region’s M&A activity mirrored the moderate levels witnessed throughout the year, demonstrating a reduction compared to 2022. Nonetheless, the potential for enhanced activity is on the horizon. As central banks in the region engage in discussions about potential interest rate cuts towards the end of the year, a wave of optimism is evident among both domestic and foreign investors. The prospects of lower interest rates could stimulate economic recovery by encouraging consumption and investment, thereby fostering an environment more conducive for business expansion. Should this scenario materialize, a more favorable M&A landscape could start emerging from the second half of 2023 onwards.