Latin Finance - January/February 2011 - 52

DEALS of the YEAR
2010

to inject 690 million reais into NCB via an issue of new shares at 16 reais each. Also as part of the deal, the owners of Bahia get 47% of Globex, while Pão de Açúcar keeps a minimum 52%.

Half Baked

The merger had to be renegotiated because the initial agreement was done in a hurry, according to Bertoldi, who notes that Pinheiro Neto was not involved at that stage. “When the companies were in the middle of negotiating the deal, information about the talks was leaked to the market, which impacted Globex’s shares,” he explains.

More IPOs coming, says Bertoldi “After this happened, the companies rushed to an agreement and signed a document that had only been semi-ﬁnalized without concluding negotiations. There was no due diligence, no shareholder agreement. They decided to announce the deal with a document that was half-cooked,” he continues. When Bahia took a closer look at the signed documentation, it realized a mistake had been made. “A lot of things had not been properly discussed. There was no way this deal could have been signed at that stage without further negotiations. Casas Bahia realized it needed lawyers to renegotiate and came to us,” Bertoldi says. Renegotiating was no easy feat. On one hand, family-owned Bahia felt it had

been mislead. On the other hand, Globex felt it should stick to the deal that had been signed, explains Bertoldi. He adds that at the beginning, meetings between the two parties were very tense, and at times even became emotional instead of rational. “Eventually, with a lot of patience after working many weekends and many holidays, both sides were able to reach common ground and formalize a deal that was mutually acceptable,” Bertoldi says. The lawyer adds that the deal took up most of his time in the ﬁrst quarter of 2010. “The deal that took up most of my time in the second quarter was the deal between LAN and TAM airlines,” Bertoldi says. “The airline deal was a truly crossborder deal that required us to take into account Chilean, Brazilian and US law,” he adds. The lawyer expects Nova Casas Bahia to focus on digesting the 2010 transaction before moving on to execute more growth plans. As for more M&A deals, he thinks the company, which now has around 600 stores, might face antitrust issues if it wanted to acquire a company in the major Brazilian markets, where it has a very strong position. An alternative, Bertoldi speculates, could be to make acquisitions in small-to-medium sized cities where it does not have as much of a presence. Pinheiro Neto’s work this year was not restricted to M&A. The ﬁrm also worked on several initial public o erings at a time when not all IPOs priced within target. For instance, Multiplus, which manages the mileage program for Brazilian airline TAM, saw its ﬂoat fall short. The deal’s 39.3 million shares priced at 16.00 reais, below the 21.00 reais midpoint and 11% under the bottom of a wide 18.00-24.00 reais range. Bertoldi says the timing of this IPO was not ideal. Another IPO Pinheiro Neto was involved in, that of toll-road company Ecorodovias, did better, landing within target. Ecorodovias raised 1.36 billion reais by selling 92 million primary and 52 million secondary shares at 9.50 reais, within the 9.00-12.00 reais range it had set. Bertoldi expects Brazilian IPOs to fare much better in 2011. “We might see a lot

of IPOs in the second quarter of 2011 in sectors such as agribusiness, commodities and retail,” he notes, adding that many companies are preparing follow-ons or IPOs. He declines to say which companies he is referring to. Pinheiro Neto also advised Banco do Brasil, Caixa Econômica Federal, Banco do Nordeste do Brasil, Bradesco and Itaú in connection with the 7.2 billion reais ($4.1 billion) ﬁnancing for the Jirau hydroelectric power plant in the Amazon. And it was counsel to Banco Votorantim and Bradesco on the $446 million ﬁnancing for the MPX Porto do Itaqui thermal power project. LF

Chile Law Firm
Claro y Cía

Clear Winner C

hile’s Claro y Cía, established in 1880, is no stranger to complex M&A. In 2010 it acted as legal counsel for LAN Airlines in its merger with Brazil’s TAM that promises to be the largest airline in the region. “This is a breakthrough deal because the merger of two international companies is something that had never been seen before in Chile,” says Felipe Larraín, Claro y Cía partner who worked on the deal. “With this transaction, LAN increases its exposure to investors outside of Chile.” Synergies alone are expected to generate $400 million annually, according to regulatory information on the deal. LATAM will have combined revenues of $8.5 billion and market capitalization of about $12 billion, say the merging entities. According to Larraín, LATAM will be listed in Chile, have ADRs in New York, and also gain access to the Bovespa. The transaction is also interesting for regulatory hurdles overcome. Larraín says that for the deal to materialize, all sides had to ﬁnd a way to comply with Brazil’s requirement that 80% of the local company’s voting shares remain in the hands of Brazilians. “To comply, we are splitting TAM’s shares in two: preferred

52 LATINFINANCE

January/February 2011

Latin Finance - January/February 2011

Table of Contents for the Digital Edition of Latin Finance - January/February 2011