Latin Finance - April 2008 - 8

M&A Shares in the Bovespa and BM&F surged on news of the merger of the two companies late March. A new holding Brazil’s Vale has terminated talks on a takeover of Swiss miner company, provisionally called Bolsa Nova, will house the Xstrata that could have generated a record $90 billion in M&A Bovespa and BM&F brands and is expected to have a market cap volume. Optimism among investors and bankers was running close to $20 billion, making it the second largest exchange in the high for a deal up until late March, when they jointly Americas. announced a termination. Bolsa Nova’s subsidiaries will cover the full range of tradable Using language that clearly indicates disappointment, the assets available in LatAm including currencies, commodities, pair emphasized that the deal would have created shareholder derivatives, fixed income, equity and equity derivatives. Bolsa value, but that agreement could not be reached. However, they Nova will buy up all the shares in both exchanges and issue new left significant wiggle room for a return to the negotiating ones that will result in a 50-50 ownership. Bovespa holders will table. also get a cash payout of 1.24 billion reais to adjust for the Vale reserves the right to make an offer for Xstrata within different shares outstanding in each company. the next six months if Xstrata’s board agrees to one or if there is The merged exchange seeks to establish a new role as a a competing bid, while Xstrata believes a deal creates value for LatAm exchange going forward. “The idea is to create regional both sides. Glencore, which owns consolidator,” says Marco Goncalves, 35% of Xstrata, appears to be the head of M&A for Brazil at Credit only block, pushing for marketing M&A Rank by Volume, Year to March 24 Suisse, which advised Bovespa. agreements Vale is not willing to give. UBS goes into the lead Rothschild advised the BM&F. A deal could still take place, The new company would look to Rank Advisor Value $m # deals speculates one investor, who points set up specific agreements or make 1 UBS 4,669.90 5 out that Glencore may yet opt to sell outright acquisitions of other 2 JPMorgan 3,410.00 6 its stake for an estimated $25.5 exchanges in the region. Among the 3 Citi 2,390.00 3 billion. JPMorgan and Deutsche most obvious candidates is the 4 Credit Suisse 2,282.24 4 Bank are advising Xstrata. Glencore Mexico’s Bolsa, with which the 5 HSBC 1,900.00 1 is heard to have hired Citi and Bovespa was previously in talks to 6 Jefferies Randall & Dewey 1,800.00 1 Morgan Stanley, while Credit Suisse set up a trading agreement for local 7 Morgan Stanley 1,030.78 1 is understood to be among Vale’s investors to buy and settle offshore. 8 RBS 900.00 2 advisers. Another exchange the BM&F has 9 Lehman Brothers 850.00 1 Sellside analysts and buysiders historically expressed an interest in 10 Evercore Partners 565.00 1 blame Swiss-based commodity for linkups include Argentina’s Bolsa Subtotal 13,024.81 19 powerhouse Glencore for breaking de Comercio de Rosario, which Total 25,568.12 233 off the engagement of Vale and trades commodities. Xstrata. “Glencore has dictated the Source: Dealogic negotiations throughout the whole process, but it feels like they may be Brazilian meat producer JBS plans to raise as much as 2.55 overplaying their hand now,” says an angry Xstrata billion reais in a private placement of new shares to fund $1.28 shareholder. “Incredibly, 65% of the holders are not being billion in acquisitions of three companies. The world’s largest represented here – it’s a disenfranchisement of the majority,” beef producer will bring its global market share to about 10% he adds. with the separate purchases of Virginia-based Smithfield Foods for $565 million cash, Kansas City-based National Beef for $465 million cash and $90 million stock, and Australia’s Tasman Proving that there is still a lot of cash out there for the right Group for $150 million cash. JPMorgan advised JBS on the two high grade names, $50 billion in financing for the Vale-Xstrata US transactions, while Rothschild advised on Tasman. deal was well advanced last month. Bankers expected a bridge Moody’s kept JBS’ B1 rating on review for possible including an $8 billion 18-month tranche at Libor plus 60 basis downgrade. The agency is concerned about integration and points and a $10 billion two-year at 75 basis points. A $15 execution challenges from 10 acquisitions since 2007, billion 3.5-year term loan was said to be priced at around 100 particularly “the ability of JBS to turn around its troubled US basis points over Libor. beef operations in an operating environment that may continue In export finance, a $15 billion five-year piece was heard at to present cost pressures and weaker demand.” LF 120 basis points while a $2 billion seven-year piece apparently slid up to 150 over Libor from an earlier 140 basis points. Santander, HSBC, Credit Suisse, RBS, Lehman, Citi, and BNP UPDATE Paribas were all heard participating as leads, having committed For more on M&A see www.latinfinance.com to tickets of up to $7.5 billion in some cases. Vale and Xstrata Part Reluctantly Bovespa-BM&F Merger Cheered Beefing Up War Chest Stands Redundant 8 LATINFINANCE April 2008

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Latin Finance - April 2008

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