Foreigns lead mergers and acquisitions in logistics, says PwC

For the first time, foreign groups led the annual number of mergers and acquisitions in the transport and logistics industry in Brazil – according to a report prepared by PwC consultancy. 57% of the 30 transactions announced in 2013 had participation of investors from outside the country.

It is a common mistake to think that foreigners generally make more acquisitions, because in truth Brazilian companies usually dominate operations. Therefore, the result of 2013 was surprising to us, says Ernani Mercadante, a partner at PwC. In 2010, the share of investors outside the country was only 23%. Since then, there has been an increased participation of foreigners every year until the record registered last year.

When there is a great demand for infrastructure improvements, such as in ports, the interest of investors grows. He knows that if there is a [operational] deficiency, it will probably be attractive, says Mercadante.

He said national companies in the industry ended up returning in 2013 to investment opportunities in infrastructure concessions – such as airports and highways. Mainly large constructors were aimed at airports. Galeão, for example, was won by Odebrecht. Confins was won by CCR (Andrade Gutierrez, Camargo Corrêa, and Soares Penido groups), which is also a domestic company.

Overall, he evaluates as positive the entrance of foreign companies in the country. I have no doubt that this is a good sign. It is a positive factor for the economy, because it shows investors have confidence, he says.

Among these operations is the sale of Valor da Logística Integrada (VLI), a branch created by Vale that had some shares purchased by the Japanese company Mitsui and by Brookfield Asset Management fund. Also on that list we have the purchase of Prumo Logística (ex-LLX, the port project of EBX group) by EIG Management Company.

Mercadante also recalls that in 2013, the logistics branch of Mexico’s Femsa – bottler of Coca-Cola – bought the Brazilian fractional cargo company Expresso Jundiaí. This express cargo market has shown a good move. We’ve seen several acquisitions in this subsegment in recent years, such as TNT buying Expresso Araçatuba  and Fedex buying Rapidão Cometa, he says.

Also in 2013, the american air transport services company Erickson Air-Crane purchased the air logistics branch of HRT – Air Amazonia. Brazilian company EBX Holding and the american BP Products North America formed the joint venture Marine Fuel EX (MFX), which will handle the logistics of marine fuels at the port of Açu (RJ).

Raizen, a joint venture between Shell and Cosan, purchased the remaining 33.3% stake of Terminal Exportador de Álcool de Santos (Teas). Minority stakes of Gol Linhas Aéreas were also acquired by Bank of America Merrill Lynch (BofA) and private investors.

PwC’s survey also shows a growth in participation of financial investors, which accounted for only 5% of transactions in 2006, reaching 33% in 2013. But strategic investors largely dominate the transactions. Those are investors who are seeking long-term returns, he says.