América Latina Logística (ALL) is seeking a buyer for its two railroads in Argentina. In the red since 2007, both ALL Central and ALL Mesopotâmica operations recorded a loss equivalent to US$8.34 million in 2011 and it became a problem for the Brazilian Company, which put these two assets on sale. There are some negotiations with several local groups, assured three sources connected to the holding. Techint is seen as the favorite to take on both operations. When asked about it, Techint did not officially comment on the subject. After asked about it by Valor, ALL published this evening the confirmation of negotiations.
The network given to ALL in Argentina has about 8.3 thousand kilometers, being the biggest of the country regarding extension and the second one in freight transported: more than five million tons a year. Concession contracts of the former tracks Urquiza and San Martín, as they are known until today, are in force up to 2023. The fleet comprises 158 locomotives and 7,380 cars.
In Argentina since 1999, ALL is facing problems with unions and difficulties regarding high inflation – independent institutes estimate it at about 25% a year, while the official rate is below 10% – for freights, although this last issue was diminished in 2011. Even so, it has been impossible to return to normal, which occurred for the last time in 2006. Back then, the Company had a profit equivalent to US$5.91 million.
The operation represents 5% of the total business in ALL railroads. During the last years, the political instability in Argentina made the Company unhappy, which lead it to avoid comments about its activities in the neighbor country. It was thought about even transferring operation business to Buenos Aires, to Ferrosur, railroad managed by Loma Negra, a cement manufacturer whose control belongs to the Brazilian Company Camargo Corrêa. In fact, Ferrosur was not interested in opening a new business transaction.
During the last months, ALL talked to Techint – the biggest private Company of Argentina – and to several local companies. According to Clarín newspaper, the contractors Iecsa, Roggio and Emepa were in the list, besides the group headed by Eduardo Eurnekián, owner of Corporación América, which recently bought the concessions for Brasília and São Gonçalo do Amarante airports, in the vicinities of Natal. The Argentinian morning newspaper ensures the business with Techint. The sources asked by Valor pointed out the group as the favorite, but they did not confirm if the business was closed.
Techint already operates Ferroexpreso Pampeano, one of the six largest Argentinian railroads. ALL Mesopotâmica starts in the north Province of Buenos Aires, the most populous and economically important of Argentina, and passes through the northeast of the country. It connects the most important networks from Brazil (in the gaucho municipality of Uruguaiana), Uruguay (in Salto Grande) and Paraguay (in Encarnación). And ALL Central connects the surroundings of Buenos Aires to the pre-Andean Cordillera area, called Cuyo, passing through Cordoba and Santa Fe provinces.
ALL’s board believes that selling its assets in Argentina will be blessed by the cabinet of President Cristina Kirchner, re-elected in October 2011, for four more years. Since Néstor Kirchner’s presidency, between 2003 and 2007, K’s government has approved the re-nationalization of big companies privatized in the last decade.
An unforgettable case was Aguas Argentinas, given to the French Company Suez, whose contract was terminated in 2006. After that, Aerolíneas Argentinas returned to its previous status of state Company in 2008. The Government also waged a public fight against Telecom Italia, controller of the main local operator, even threatening to revoke its concession. Finally, after years of fights, suddenly the dispute ended and the Italian group was allowed to expand its participation in the telephone Company.
Now it is spoken openly of the possibility of YPF’s re-nationalization, Argentinian oil bearing privatized in 1999. The Company’s control was bought by the Spanish Company Repsol, but the Kirchners encouraged the entry and gradual ascension regarding the participation of the Eskenazi family.
Last year, Petersen group bought 10% more of share participation, and today, the group has 25% of YPF Repsol. It is controlled by Enrique Eskenazi, which acquired the Province of Santa Cruz bank in 1996, governed by Néstor Kirchner during 12 years. In the last months, YPF became a target of several accusations made by Casa Rosada, which raised suspicions about the Government’s intention to take on the international control of it. Repsol had already announced the idea of reducing its oil bearing shares to 51%.
In 2011, as per audit disclosed last week, ALL’s rail operations in Argentina had a loss equivalent to US$8.34 million. This number is 97% higher than the last checked in 2010. In the first quarterly, the isolated performance was better. If we compare the last two years, the profit increased from US$5.08 million to US$7.62 million.
By the end of February, Cosan made an offer to acquire 49% of ALL’s control block. The block is composed by BNDES; pension funds like Previ and Funcef; BRZ ALL fund; and private investors. A new partner is accepted only after the approval of others from the control block.
See below the relevant fact disclosed by the operator at the Stock Exchange:
ALL – AMERICA LATINA LOGISTICA S.A., an open Company headquartered in the City of Curitiba, State of Paraná, located at Rua Emílio Bertolini 100 (Company), hereby informs, in order to meet the foregoing on article 157, section 4, of Law No. 6404/76, at Securities and Exchange Commission (CVM – Comissão de Valores Mobiliários) Instruction No. 358, of January 3, 2002 for the purposes of Article 7 of CVM’s Instruction No. 481, of August 8, 2008, disclose to shareholders and to the general market that we are dealing with some potential investors interested in acquiring a concession’s share that the Company has in Argentina (ALL – America Latina Logistica Mesopotamica S.A. and ALL – America Latina Logistica Central S.A.).
We clarify that negotiations are in its initial phase. Until now, there is no definitive or binding agreement related to the said acquisition.
The Company shall keep its shareholders and the general market informed about an eventual evolution regarding the issue of this release.
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