Funds Seeking Brazilian Companies Have US$ 25 Billion

01/18/2016 - 16h28

Bradesco BBI, one of the main merchant banks in Brazil, has disclosed a survey which shows that the investment funds which have been seeking companies to buy in Brazil have US$ 25 billion (R$ 100 billion) ready to be invested in developing countries.

Their main targets are energy companies, concessions in the highway segment, airports and sanitary companies belonging to groups involved in the Brazilian Federal Police's Lava Jato operation -which is investigating embezzlement in Petrobras-, as well as exceptional bargains in the areas of education, health care and real estate.

Last year, funds such as Brazil's GP, Brookfield, of Canada, and GIC (a sovereign wealth fund in Singapore) invested some R$ 23 billion (US$ 5.6 billion) n only 12 of the biggest purchases of Brazilian companies.

The survey by BBI, which targeted internal consumption, stresses that in eight of those operations the funds purchased the companies' control and not only a part.

Last year Camargo Corrêa, which is involved in the Lava Jato operation, put two of its most sought after companies up for sale. It very sold rapidly the entire company of Alpargatas for R$ 1 billion (US$ 246 million), nearly twice the amount the company was worth in the stock market.

On the other hand, InterCement, the second biggest cement company in Brazil, was not sold because the group wanted to sell at most 18% of the company.

Investors, especially foreigners, seek controlling positions because they have more fire power due to the depreciation of the Brazilian real. In addition to that, Brazilian companies are worth less in national currency because their performances were affected by recession.

FOREIGNERS

Investment funds are always seeking opportunities which will accept taking risks in exchange for high financial returns. However, the Brazilian crisis brought in its wake major business groups that believe the crisis will be over and want to settle in the country.

China Three Gorges, of China, paid R$ 13.8 billion (US$ 3.4 billion) for two government-owned hydroelectric power plants. Italian group Gavio has bought the biggest share of EcoRodovias, belonging to CR Almeida, for R$ 2.2 billion (US$ 543 million).

Another event which made temptation rise occurred last week, when Petrobras decided to put up for sale 36% of Braskem, the biggest petrochemical industry in Latin America – Petrobras controls Braskem through Odebrecht.

Analysts say that today Braskem "prints money" and was only put up for sale because Petrobras needs to reduce its debt.

Translated by THOMAS MUELLO