LatinFinance - May/June 2016 - 25

ARGENTINA
M&A

Argentine companies are on a fresh hunt for capital as foreign
investors are eyeing opportunities in a country set for economic
rebound. By Charles Newbery

Hunting for growth
M&A activity, with 77 deals totaling nearly
$2 billion, or 2% of activity in the region,
according to data compiled by Dealogic. By
comparison, Brazil had 707 deals totaling
$44.6 billion, or a 51% share, followed by
Mexico with 29%. Chile, Peru and Colombia trailed, but still saw more deals than
Argentina, the data shows.
"For buyers, Argentina was basically off
the radar screen," says Matias Eliaschev,
a managing partner of MBA Lazard, an
investment banking and asset management firm.
Now it's back.
The new government of President Mauricio Macri, a conservative businessman,
has taken steps to improve the business
climate in Argentina. Since taking power
VIEW FROM ARGENTINA: Grupo Los Grobo
CEO Gustavo Grobocopatel believes "it's a
time to buy in Argentina, not to sell"

Source: Reuters

razil's state-run oil company
has spent a year trying to sell its Argentine
assets. Now, in a sign of investor interest
returning to the country that was previously
a global financial pariah, Petrobras is on
the verge of finalizing a more than $1 billion
deal.
Petrobras wants to exit Argentina to help
shore up its finances, which are strained
by low global oil prices, heavy debts and a
corruption scandal at home.
While it failed to find a buyer last year, a
new candidate has stepped forward: Pampa
Energía, Argentina's biggest electric utility.
The deal seems like a natural fit. Through
the acquisition, Pampa would gain oil and
natural gas fields, a refinery and service
stations in a country with huge energy
resources and rising demand.
More broadly for Argentina, the dealmaking is a sign of how improving business confidence could unleash a flurry of
mergers and acquisitions after years of little
movement. Optimists forecast brisk activity
that could redraw the business landscape
in important sectors. Skeptics, too, predict
a rise in dealmaking, but warn of bumps
along the way.
M&A slumped in Argentina after 2010,
when big acquisitions in the oil sector by
Chinese firms pushed activity above $6 billion. But in the subsequent years, potential
buyers were turned off by limits on moving
capital in and out of the country. Galloping inflation, heavy taxation, price caps,
regulatory uncertainty and trade restrictions also turned buyers away. Last year,
Argentina ranked sixth in Latin America in

in December, he has cut export taxes, lifted
capital flow restrictions - companies can
once again take profits out of the country -
and allowed an overvalued peso to devalue
by more than 40% and float freely. He also
has settled the country's remaining debts
from a 2001 default on $100 billion of borrowing, expanding access to financing for
the country and companies. Resolving the
debt issue is expected to gradually bring
down lofty borrowing costs and inflation,
improve government finances and revive
the economy.
"The new government is sending a message to the world that there is more predictability for doing business," says Carlos
Germano, a political analyst in Buenos
Aires.
As a result, more firms are on the hunt
for assets, with a number of deals already
on the books. New York-based hedge fund
Fintech Advisory closed the purchase of a
controlling stake in the holding company
for Telecom Argentina, one of the country's
two telecommunications giants, for $960
million. Cablevision, a pay television operator, completed the takeover of the now
defunct US cell phone operator Nextel's
operations in Argentina for $178 million.
Arcor, a local food producer, bought 30%
of Mastellone Hermanos, a leading milk
producer, for $60 million.
The takeover tide could swell over the
next few years.
One reason is that asset prices are far
cheaper than in most of Latin America.
The enterprise value of Argentine companies was around six times their earnings
before interest, tax, depreciation, and
amortization at the end of September 2015,
according to data compiled by First. This
EV/Ebitda ratio was 6.9 in Peru, 9 in Colombia, 10.3 in Chile, 12 in Brazil, and 12.2
in Mexico. The lower the ratio, the more
May/June 2016 - L ATINFINA NCE.COM 25

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