January 29, 2016
With the downfall of Brazil’s major construction firms, several of which are
embroiled in corruption probes, mediumsized firms are emerging as a fresh
option for foreign infrastructure players ready to bet on Brazil, industry
sources told this news service.
Due to the uncertainties surrounding Odebrecht and OAS, doors have
opened for the smaller and less tarnished companies to naturally rise as
alternative candidates for foreign investment, said Luciana Nazar, partner at
the consultancy firm GO Associados. They will have more opportunities to
participate in consortiums to build larger and more complex infrastructure
projects, which they have had difficulty winning in the past because the big five
were so dominant, Nazar explained.
For foreign players that do not yet operate in Brazil, mediumsized companies
make good targets, as they know how to navigate the country’s economic
environment, said Marcio Lutterbach, head of infrastruture at PwC Brazil.
Those that already operate in Brazil are less likely to buy local companies,
Lutterbach continued, as they are already familiar with the local regulations
and bureaucracy, and can invest directly in projects of their choosing.
Among potential target companies cited by sources with knowledge of Brazil’s
infrastructure sector were the Minas Gerais statebased Construtora
Barbosa Mello (CBM), Paranasa and Aterpa; the São Paulo statebased
Serveng and Triunfo; Grupo Marquise, from Ceara state; the Bahia state-based AJL; and Seta Engenharia, from the state of Santa Catarina. Most of
these companies have an annual turnover of between BRL 400m (USD
100m) and BRL 800m, the sources pointed out.
All the companies were contacted by Mergermarket. Paranasa, Marquise,
Triunfo, CBM and Seta did not comment, while AJL and Serveng did not
respond to requests.
Aterpa, however, told this news service in November that it has been
receiving approaches from foreign strategic investors since 2009, and even
signed a nondisclosure agreement a few years ago with a European player
that was interested in buying a stake in the company.
Salazar confirmed that Europe, Japan and Chinabased companies regularly
hold conversations with Brazilian infrastructure companies, and that medium-sized firms like his have become more attractive since the larger ones were
implicated in the corruption probe known as Lava Jato (Car Wash).
Brazilian companies are also reaching out. Pedro Guizzo, partner at the
advisory firm Ivix, said he has been noting that these midsized companies
are seeking foreign partners in order to access capital and technology.
Lutterbach also noted that Brazilian companies are finding it difficult to access
funding, as the Brazilian development bank (BNDES) is not pouring as much
money into the space as it used to.
Chinese companies, for example, want to buy assets that can boost the
country’s exports to China, like energy, railways and harbors, said Lutterbach.
Japanese firms are especially interested in the sanitation space and
companies from Germany, France, Italy and Spain are also analyzing assets
in the country, he added.
In December 2015, Italybased Gruppo Gavio closed a BRL 2.2bn ( USD )
deal with the Parana statebased CR Almeida, majority shareholder of the
highway concessionaire Ecorodovias (BVMF:ECOR3). Lutterbach explained
that, in this case, the Italian company was interested in Ecorodovias’ assets
and was not necessarily aiming to participate in future infrastructure projects.
However, it is evidence that foreign players still see Brazil as a viable
investment opportunity, he added.
Companies from the United States, however, are typically less interested in
Brazil's infrastructure opportunities, Guizzo pointed out. “Large states in the
US, like Texas, California and Florida, tend to spend more on infrastructure
than Brazil; they’d rather stay there,” he pointed out.
A German banker told Mergermarket that German companies seem to be
skeptical about the South American country and have not been “expressing
interest” to invest there. Strong regulatory barriers, the German banker
added, are one of the deal breakers.
Germanybased Bilfinger (FWB:GBF), which already operates in Brazil, said,
through its spokesperson, that its geographic focus is Europe, as stated in its
new strategic plan released in October 2015, and that the company has not
decided what will be the fate of its noncore activities, which include operations
in Brazil. The decision, however, will not be taken in the short term, the
Meanwhile, Hochtief (ETR:HOT) sold its unit in Brazil in 2009 to German
group Zech International and does not intend to reenter the country’s market
in the moment, Hotchief’s spokesperson said.
Austriabased Strabag (VIE:STR), which has already participated in small
infrastructure projects in Brazil, said the company is currently expanding its
operations in Chile and Colombia, and Brazil is not a part of its current strategy.
An industry source familiar with the stateowned conglomerate China
Merchants Group said the group might be interested in investing in
infrastructure sector in Brazil, focusing on companies that can build railways,
ports and related facilities. Also, the Chinese government is encouraging its
companies to invest in Brazil in order to improve the country’s exports
logistics, facilitating the commercial relationship between the two nations, the
The Japanbased conglomerate Marubeni already operates two sanitation
facilities in Chile, and there is the possibility that it will target assets related to
the sector in Brazil and Peru, Marubeni’s spokesperson said, without
specifying if the company would directly bid for such projects or if it would be
interested in partnering with a local player. According to its website, Marubeni
has an agribusiness trading operation in Brazil and since April 2015, has been
participating in a joint venture with the Japanese companies Mitsui and
MODEC to build and operate floating vessels to serve the oil & gas industry.
by Bruna Maia Carrion in Sao Paulo, Laura Larghi in Munich, Jennifer Zhang in
Chongqing, and Yurika Masuda in Tokyo
Source 1/29/2016 Intelligence Detail | Mergermarket.com
1/29/2016 Intelligence Detail | Mergermarket.com
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