ANDEAN REGION M&A WAS LED BY THE ENERGY, INFRASTRUCTURE AND MINING SECTORS
SEVERAL M&A DEALS WERE REGISTERED IN JULY, MAINLY IN THE ENERGY SECTOR, AS THE TRANSITION TO CLEAN ENERGY TREND GAINS MOMENTUM. OTHER ACTIVE SECTORS INCLUDED MINING, INFRASTRUCTURE, RETAIL AND ENTERTAINMENT
During the month of July, Enel Chile announced the US$ 550 million sale of Arcadia Generación Solar (“Arcadia”) to Sonnedix. Arcadia owns four operational solar plants which are located in the northern regions of Chile, Atacama and Antofagasta, with a total installed capacity of 416 MW. Sonnedix, the buyer, is an international renewable energy producer with extensive experience in developing, building, and operating long-term renewable energy projects. With a total installed capacity of over 9,000 MW, Sonnedix boasts a development portfolio of more than 6,000 MW globally. The seller, Enel Chile, is the largest electricity holding company in the country and a subsidiary of the Italian Enel Group. The company’s generation assets are diversified, with a significant focus on renewable energies, which make up 76% of Enel Chile’s total consolidated capacity. The portfolio of photovoltaic plants in the transaction include “Diego de Almagro” (36 MW), “Carrera Pinto” (97 MW), “Pampa Solar Norte” (79 MW), and “Domeyko” (204 MW), and collectively generate nearly 1 TWh/year of net production. After closing, Arcadia will continue to supply energy to the Enel Group through a power purchase agreement (PPA) covering a portion of the production from these plants. The deal is a significant milestone in the Chilean renewable energy sector, allowing Sonnedix to expand its presence in the country’s solar energy market while Enel Chile continues its commitment to renewable energy development and sustainability.
Also in July, the multinational corporation Lundin Mining successfully completed the acquisition of a 51% stake in SCM Minera Lumina Copper Chile (“Lumina Copper”) for a total value of US$ 950 million, a transaction that was announced in March. Lumina Copper is a Chilean company that operates the “Caserones” copper and molybdenum mine, located in the Copiapó Valley, within the Atacama Region. The seller, and previous owner of Lumina Copper, is JX Metals Corporation, a Japanese company specializing in the research, development, production, and sale of advanced materials and high-tech products. Its portfolio includes materials for batteries and copper alloy products. As for the buyer, Lundin Mining is a Toronto Stock Exchange listed Canadian mining company focused on the exploration, development, and production of base metals such as copper, nickel, zinc, and other precious metals with operations worldwide (Canada, Portugal, Chile, Brazil, and the United States). The total consideration for the acquisition included US$ 800 million in cash payable at closing, as well as a deferred cash consideration of US$ 150 million, which will be paid in installments over a period of six years following the closing date. Additionally, Lundin Mining will have the right to acquire an additional 19% interest in Lumina Copper for US$ 350 million over a five-year period. This acquisition will enable Lundin Mining to substantially increase its copper production in Chile to over 200 thousand tons and consolidate its position as a leading mining company in the Atacama Region.
Another relevant operation in the mining industry was the signing of a royalty agreement between Los Andes Copper and Ecora Resources for a total of US$ 20 million. This royalty will be calculated based on the sale of all minerals produced by Los Andes Copper’s “Vizcachitas” Project in Chile. Under the agreement, Ecora Resources will receive royalty payments equal to 0.25% of Net Smelter Return (NSR) for minerals produced in open pit operations, and 0.125% of NSR for minerals produced in underground operations. Los Andes Copper develops mining projects and currently owns the entirety of the “Vizcachitas” copper-molybdenum project strategically located along one of Chile’s most prolific copper belts and one of the largest copper deposits in the Americas. Ecora Resources, on the other hand, is a global royalty company with operations primarily in Australia, the Americas, and Europe. Previously, Ecora’s royalty revenues originated mainly from the coal mining industry, but the company has reshaped its strategy to attain higher exposure to minerals that will play an important role in the global energy transition.
Furthermore, there was another significant announcement in the Chilean mining sector. At the end of July, Pan American Silver announced its decision to sell its 57.75% stake in Agua de la Falda for US$ 45.6 million to the global mining corporation, Río Tinto. As a result of this transaction, Rio Tinto will now become a strategic partner of Codelco, a Chilean state-owned enterprise and the world’s largest copper mining company, holding the remaining 42.25% stake in Agua de la Falda. Established in 1996, Agua de la Falda primarily focuses on the exploration, extraction, and commercialization of gold and other precious metal projects. The company owns the “Jeronimo” project, located in the Atacama Region along with several adjoining concessions. Pan American Silver, the seller, is a Canadian-based producer of precious metals in the Americas which operates silver and gold mines in Canada, Mexico, Peru, Bolivia, Argentina, Chile, and Brazil. Rio Tinto, headquartered in the United Kingdom, is the second-largest mining conglomerate globally, present in 35 countries.
In the retail industry, CorpGroup, through its subsidiaries, sold a 1.7% stake in SMU for a total of US$ 17.9 million. This divestment comes after the group previously liquidated 75.5 million shares in June for a total of US$ 13.3 million. SMU is the parent company of various supermarket and wholesale chains, including Unimarc, Alvi, Mayorista 10, and Super 10, with operations in Chile and Peru. The seller, CorpGroup (and its subsidiaries), is linked to the Saieh family and is considered one of the largest business conglomerates in Chile, with assets in the communications, financial, retail, and real estate industries. The scheduling of the share sales was planned to ensure that CorpGroup does not reduce its controlling ownership. The decision to divest a portion of the stake in SMU comes as CorpGroup aims to generate liquidity to meet its financial commitments.
In Colombia, SMN Termocartagena announced the acquisition of a 203 MW thermal power plant, owned by the energy services company, Enel Colombia. Located in Mamonal, an industrial area within Cartagena, the thermal power plant generates energy using oil and gas. The purchase agreement also included the acquisition of Sociedad Portuaria Central Cartagena, a related company that holds the port concessions that are essential to operate the thermal power asset. Sociedad Portuaria Central Cartagena owns a 20-year concession to operate the Port of Cartagena in Mamonal, a location near the thermal power plant’s premises with the infrastructure and capacity to transport 35,000 tons of hydrocarbons annually. The operation, which was announced in July, is expected to close during 2023, after which Central Térmica Cartagena will be operated and managed entirely by SMN Termocartagena. The seller, Enel Colombia, is a subsidiary of Enel Group, a leading energy producer with headquarters in Italy. The divestiture of the thermal power plant is part of Enel Colombia’s strategy of focusing its efforts on the development of non-conventional renewable projects in the northern part of the country (it currently has an 800 MW renewable energy portfolio under construction in Colombia). As for the buyer, SMN Termocartagena is a Colombian energy company engaged in the acquisition and operation of power plants for electricity generation.
Also in July, two infrastructure funds managed by Ashmore Colombia acquired a stake in Concesionaria Ruta Bogotá Norte, a consortium composed of two leading construction companies in Colombia: Obrascón Huarte Laín (OHLA) and Termotécnica Coindustrial. The consortium oversees the “Accesos Norte Fase II” project and has a 29-year concession to finance, construct, improve, and maintain the “Norte Bogotá” highway, one of the most relevant suburban corridors that connect Bogotá with the main cities of northern Colombia. The construction of the project, which began in 2022, has an estimated investment value of US$ 350 million and is part of the three concessions awarded by the government to improve mobility throughout the country. The buyer, Ashmore Colombia, is part of Ashmore Group, an international investment manager with over US$ 57 billion in assets under management (AUM). With the acquisition, Ashmore Colombia will consolidate its presence in the road infrastructure industry in the country and will benefit from part of the revenues from the toll collected during the concession period of the project. OHLA is an international construction company based in Spain which is currently controlled by Mexican shareholders. Termotécnica Coindustrial is a subsidiary of Ethuss Group, a holding company headquartered in Colombia, which has interests in the infrastructure, waste management, public services, energy generation, and metal structures sectors.
In the music events industry, the American multinational entertainment company, Live Nation Entertainment, acquired a controlling interest in the Colombian music promoter, Páramo Presenta, renowned organizer of some of the largest music festivals in the country. Live Nation Entertainment carried out the acquisition through OCESA, one of its subsidiaries based in Mexico which is among the largest music promoters globally and with a strong presence in Latin America. In addition to acquiring a majority stake in Páramo Presenta, the deal terms also included that tickets for future events will be sold through Eticket, which is OCESA’s Colombian ticketing entity and part of Live Nation Entertainment’s ticketing platform. The acquisition is aligned with the US-based company’s strategy to consolidate its presence in Latin America and strengthen its live shows business line. Founded by the owners of local music production companies Absent Papa and T310, Páramo Presenta organizes major festivals and concerts such as Festival Estéreo Picnic, a 4-day music festival with over 100.000 attendees, considered to be one of the best music festivals globally.
In Peru, the global private equity investment firm KKR, along with Entel Perú, agreed to acquire a majority interest in the optical fiber investment vehicle, PangeaCo, from Telefonica Hispanoamérica. The transaction will combine the acquired networks into a newly established independent company called ON*NET Fibra de Perú, in which KKR will have a 54% controlling interest, Entel Perú a 10% stake, and Telefónica Hispanoamérica will hold the remaining 36%. The open access network is expected to increase competition in the wholesale market, with Telefónica del Perú and Entel Perú serving as operators. In the following years, KKR plans to invest an additional US$ 200 million to expand the acquired optic fiber network and reach 5.2 million homes across 86 provinces by the end of 2026. PangeaCo was founded in 2020 as part of Telefónica Group’s expansion strategy of the household fiber optics business line in Peru. Telefónica Group is a major telecommunications service provider based in Spain that operates at regional level in Latin America and serves over 110 million residential and business customers. It delivers fixed broadband and mobile services supported by 4G and 5G networks along with a wide range of digital offerings. KKR is a leading global investment firm with US$ 510 billion AUM which focuses on alternative asset management and capital markets. Entel Perú is the Peruvian subsidiary of the Chilean company Entel Group, a leading technology and telecommunications company with over 58 years of experience. It serves over 20 million clients in Chile and Peru and offers mobile and fixed connectivity services, along with digital and IT solutions.
In the food and beverages industry in Peru, Grupo Romero, through its subsidiary Inversiones Piuranas, announced a tender offer to acquire an additional stake in Alicorp, a company in which Grupo Romero already holds a 54% controlling interest. By means of this tender offer, Grupo Romero seeks to secure an additional 9.5% participation in Alicorp, equivalent to 72,200,000 shares. Inversiones Piuranas offers 7.4 Peruvian soles per share, which could lead to a US$ 149 million total transaction price. Alicorp is the largest food and beverage company in Peru which has consolidated revenues of over US$ 4 billion. Grupo Romero, the current owner of Alicorp, is the holding company of the Romero family, which also has interests in the financial services, agriculture, power, oil, infrastructure, and logistics industries.
Latin America is witnessing a gradual reactivation of economic activity and market stabilization. There is a sense of anticipation for potential reductions in interest rates, which could further boost investments in new projects locally. The Andean region, in particular, has shown remarkable enthusiasm for investing in the renewable energy and copper mining sectors, recognizing their pivotal roles in the global efforts towards decarbonization. As the political and institutional situation in the region continues to unfold, it is expected that global investors’ confidence will strengthen, leading to increased interest in new and larger investments in the region.