LatinFinance - July/August 2015 - 47

over 50 acquisitions in the past decade.
Asian push
The Grupo Primo purchase, meanwhile,
also reflects the company's proclivity for
acquisition that diversify its offerings and
provide some insulation to the highly
volatile environment that characterizes
beef commodities. "On the commodity
business, you are pretty much relying on
the input cost and the commoditized sale
cost, and both are very volatile. When you
have a processed business and a brand
business, that connection with consumer
makes for a whole different dynamic. This
was a very important move for them,"
Rodrigues explains.
Primo includes exports to Asia and
gives JBS a stronger access to that region,
which clocked in as the largest importer
of proteins in 2014, according to a report
from the US Department of Agriculture.
Asia accounted for 36% of protein imports
globally, and JBS' exports to greater China,
South Korea and Japan all increased in the
first quarter this year versus last year.
Asian private equity outfit Affinity
Equity Partners and the Lederer family,
which founded the company, sold Grupo
Primo to JBS. Affinity paid 519 million
Australian dollars ($507 million) for a 70%
stake in Primo in 2011. Primo adds to JBS'
existing operations in Australia, where it
had acquired Australian Meat Holdings and
Tasman Group in 2007.
Setting limits
Given its historic volume in acquisitions, it's
easy to characterize JBS' growth strategy
as overly aggressive. However, the protein
producer's retraction from its bid for peer
US Hillshire Brands indicates a welcome
degree of discipline and restraint. JBS
affiliate Pilgrim's Pride shelved a $55 per
share bid for Hillshire in June 2014, after
Tyson made a $63 per share offer that
valued Hillshire at $7.7 billion. Hillshire
sealed that transaction with Tyson, which
included a stipulation that Hillshire drop its
merger agreement with Pinnacle Foods, in
August 2014.
The company has also taken steps to
manage and optimize the fruits of its latest
shopping spree. It put an initial public
offering for JBS Foods on hold and hired
Adrian da Hora in April of this year as an
administrative and finance director, with
a focus on integrating acquisitions and
replacing chief financial officer Maxim
Medvedosky. LF

CENTRAL AMERICA / CARIBBEAN
CORPORATE WITH THE BEST BOND
MARKET STRATEGY

Digicel
A strong investor relations
program and solid links
with a handful of investment banks have enabled
this telecom to strike when
the opportunity arises
Good timing is crucial for a successful
cross-border transaction, and that factor
is even more critical when volatility hits
and the issuer is headquartered in a small
Caribbean nation.
Latin America's capital markets had a
slow start to 2015 as investors adjusted to
lower oil prices, slowing economic growth
and corruption investigation at Petrobras.
International bond sales were mainly
limited to sovereigns and quasi-sovereigns.
However, in late February, Jamaican telecom
Digicel Group saw a chance to raise $925
million with the sale of a 6.75% 2023 bond.
As is the case with other recent Digicel
transactions, the bond was around three
times oversubscribed, LatinFinance heard.
"On the one hand you can say that we
were lucky with our timing, but on the
other I'd say that we were patient with
our timing and we waited for that window
of opportunity to open up and we had
very good demand for that," Digicel chief
financial officer Lawrence Hickey tells
LatinFinance.
The high-yield company had been
looking to borrow in the debt capital
markets since November 2014, but it held
off on issuing as the market turned bearish
towards the end of the year.
Barclays, Citi, Credit Suisse, Deutsche
Bank and JPMorgan managed the deal,
which was targeted mainly at US-based
high-yield investors. The deal was priced at
par and in line with price talk.
Imperative to Digicel's market strategy
is its active approach to investor relations
and its tight relationships with investment
banks. Indeed, the same banks that priced
the February bond have managed five bond
sales and two re-openings for Digicel since
2012. The issuer is remarkable among its

Latin American peers for its consistent
work with a set group of book runners.
"We have a well-oiled machine. We have
a very long standing relationship with our
banks," says Hickey, who has been Digicel's
CFO since 2002. "The banks know us very
well and our investors know us. We go and
see investors a couple of times a year and
they like the fact that we keep them abreast
of what is going on in the business."The
B2/-/B rated company has also been active
in the loan market. Last June, it extended
the tenor of an existing five-year facility
by two years, to 2019, in a transaction
managed by Citi. The $828 million loan has
tranches in dollars, euros, Jamaican dollars
and Trinidadian dollars.
Digicel tends to combine its bond sales
with liability management exercises to buy
back old bonds, a practice that has won the
company plaudits from observers in the
market. The telecom used the funds raised
in February to finance a tender offer for
its 8.25% $800 million 2017 notes. Digicel
bought back 83% of the bond, and it later
redeemed the remainder.
Digicel, which operates in 33 markets
in the Caribbean, Central America and
Asia-Pacific regions, carried out a similar
transaction last year, selling a 7.125% $1
billion 2022 bond at par and buying back
some $546 million of its 10.5% 2018 paper.
Roughly 70% of the investors holding the
bond subscribed to a tender offer that
closed in April.
"We have no major near-term maturities
because of the refinancings that we have
done over the past couple of years. That's a
very healthy position to be in and yet we do
have over $6 billion of debt on our balance
sheet. It's not an insignificant amount,
but we are comfortable with the level of
leverage that we have," Hickey says.
The telecom has a strong record as
an active high-yield issuer, and is always
looking at opportunities to raise capital and
refinance its debt at better terms. While
Hickey predicts stable market conditions
over the short term, Digicel wants to avoid
having to raise funds if volatility increases.
"We run the business pretty aggressively
in terms of our positioning of trying to
acquire customers and grow revenues and
to develop new business revenue streams
and we move pretty quickly. However,
behind that, on our balance sheet, we take
a more conservative view," Hickey says,
adding that Digicel will continue keeping a
close eye on market developments for the
next opportunity. LF

July/August 2015 - L ATINFINA NCE.COM 47
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