ENTREVISTA CON BEGOÑA CANCINO – CREEL, GARCÍA-CUÉLLAR, AIZA Y ENRÍQUEZ

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Begoña Cancino

Partner en
Creel, García-Cuéllar, Aiza y Enríquez

 

¿Cómo se ha desarrollado el primer trimestre del año en el mercado transaccional mexicano?

Desde la perspectiva de Propiedad Intelectual, el primer trimestre del año se percibe sumamente activo, la firma ha participado en varias operaciones con componente de esa práctica, no solamente por lo que hace a signos distintivos, sino también, software, secretos industriales y de forma preponderante, patentes farmacéuticas.

¿Qué sensaciones se perciben desde el sector legal?

Se percibe la sensación de que aún con la incertidumbre que pudiera implicar los cambios políticos en Estados Unidos, la inversión no se ha desincentivado, los instrumentos financieros que se apuntalaron en el año anterior han puesto sobre la mesa capital que debe ser ejercido en inversiones específicas, se espera que eso ocurra.

Durante 2016 participó usted en algunas operaciones relacionadas en cierto modo con el sector turístico y hostelero, como es el caso de la adquisición de Corporate Travel Services (CTS) por parte de Travel Leaders, o la adquisición del 51% del Proyecto Mayakoba por parte de RLH Properties. ¿Cree que este sector cuenta con potencial para que veamos grandes operaciones a corto o medio plazo?

Creemos que en efecto el sector turístico tiene potencial, pero desde la perspectiva de IP el sector que más potencial parece tener en el contexto transaccional es el farmacéutico, el de consumibles y el de telecomunicaciones.

Está usted especializada en propiedad intelectual, una disciplina que ha ganado protagonismo con el paso del tiempo en el sector legal. ¿Este tipo de asesoramiento es muy demandado en las grandes operaciones corporativas?

Es una práctica de gran importancia pues en la gran mayoría de las operaciones corporativas existe un componente de propiedad intelectual en mayor o menor medida (siempre existen activos intangibles protegidos o no por las corporaciones que inciden en su forma de hacer negocios, tanto internamente – a través de know-how, procedimientos internos, sistemas, secretos industriales, etc. – como de manera externa – marcas, patentes, derechos de autor que se utilizan en el entorno comercial como medio de identificación de productos o servicios ante los consumidores). Sin embargo, no obstante a la clara relevancia de estos temas en todo negocio y a que con el tiempo se ha ido haciendo conciencia de ello, aún no es un asesoramiento que sea tan demandado como debiera en el ámbito legal, en realidad, muy pocos despachos en el mundo tienen una práctica serie y dedicada a Propiedad Intelectual Transaccional, que conjuga conocimientos profundos en temas de IP y al tiempo, conocimientos profundos en aspectos corporativos/transaccionales. La práctica de IP al menos en México, se ha desarrollado en torno al registro y a la protección de activos intangibles, pero no a su importancia en una operación corporativa desde el punto de vista transaccional.

Podemos decir con seguridad que este despacho es el único que realmente cuenta con una práctica especializada en IP transaccional en México, que se ha ido afinando desde hace más de 8 años con nuestra intervención activa en las transacciones más importantes de México. ¿En qué sector o sectores considera usted que cobra más importancia? Cobra una relevancia mayúscula en operaciones que implican la adquisición de sociedades dedicadas a toda clase de servicios, retail, consumibles, tecnologías de la información, telecomunicaciones, mención especial merecen las grandes transacciones en las que hemos participado para documentar la adquisición de empresas dedicadas al sector de bebidas alcohólicas, principalmente, bebidas que se protegen mediante la figura identificada mundialmente como “denominación de origen”, como ocurre con el tequila y el mezcal, pues al tratarse de denominaciones de origen mexicanas que se regulan con disposiciones locales (Ley de la Propiedad Industrial), la intervención de un especialista en propiedad intelectual y transaccional, que además domine la regulación aplicable a denominaciones de origen es indispensable. Los inversionistas deberán ser cautelosos y analizar objetivamente las fortalezas y debilidades de la relación bilateral, así como el alto grado de integración económica que ya existe entre los dos países.

Hoy cada ‘twit’ que es enviado desde la Casa Blanca impacta alguna variable en los mercados internacionales. Ha predominado la hipersensibilidad e incertidumbre, sin embargo, vale la pena considerar que prácticamente ninguna acción decretada o negociada en el contexto bilateral será de aplicación inmediata. Hay instancias y mecanismos regulatorios que ni el más impulsivo y radical de los actores podrá obviar. En adición, conforme avance el año, surgirán voces y contrapesos importantes que encausarán las discusiones con base en la lógica de negocios que debiera imperar en los flujos de inversión y del comercio entre ambos países.  En conclusión, Estados Unidos seguirá siendo muy relevante para el mercado transaccional mexicano. En ese país operan la mayoría de las empresas mexicanas más globalizadas y viceversa.

También se especializa usted en el campo regulatorio. ¿Cree que la situación existente entre México y Estados Unidos puede impulsar grandes cambios legislativos?

Desde la perspectiva regulatoria/propiedad intelectual, el principal acuerdo legal que existe entre ambos países se encuentra reflejado en el TLCAN, aunque hasta el momento no se ha definido la suerte de dicho instrumento, es claro que la posible modificación y/o denuncia del mismo daría pie a cambios legislativos importantes en todos los ámbitos, incluyendo el que hace a mi práctica. Conforme a lo que ha manifestado el subsecretario de Comercio de la Secretaría de Economía, en la renegociación del TLCAN uno de los fundamentales es que no se permitirá el regreso de aranceles entre los países firmantes, y aunque hasta ahora no hay una comunicación oficial por parte del Gobierno de EU sobre los puntos que querrá renegociar, sabemos que Donald Trump ya ha enviado al congreso de EU su propuesta de renegociación de dicho tratado, en la que uno de los principales cambios sugeridos es la imposición de tarifas arancelarias cuando el nivel de importación “dañe o amenace seriamente” a industrias locales y esto estará sujeto a interpretación. De cualquier manera, entendemos que la renegociación del tratado no iniciará antes de julio, ya que el proceso interno de EU establece un periodo de 90 días para consultar a todos los involucrados.

Desde la práctica regulatoria en que me especializo, percibo que podrían haber restricciones a la importación y exportación de productos que podrían incidir en mayores requisitos legales tanto desde la óptica de IP como de protección al consumidor. De manera más concreta, hasta el momento ha trascendido que la propuesta para renegociar el TLCAN incluye cambios a comercio de bienes y servicios, reglas de origen, cooperación, barreras técnicas, cooperación y propiedad intelectual, entre otros. Ampliar la preferencia arancelaria para bienes de EU que aún tienen impuestos. Eliminar barreras no arancelarias, especialmente para productos agropecuarios. Delimitar nuevas reglas de origen que favorezcan a la producción estadounidense. Reforzar el marco de propiedad intelectual para evitar la piratería y contrabando, incluyendo mayores sanciones. Crear reglas para el sector de telecomunicaciones y comercio electrónico, entre otras, que no están contemplados. Aumentar la regulación para evitar la corrupción. Permitir que EU tenga maneras más rápidas y eficientes de crear sanciones comerciales y crear reglas comunes para el ámbito laboral, creando estándares comunes, entre otros aspectos.  

Continuando con esta difícil situación, ¿es usted optimista o pesimista respecto al mercado transaccional mexicano en base a la relación con Estados Unidos?

Estoy optimista dado a que el intercambio comercial entre ambos países es necesaria, considero que este es un momento de acomodo y que sabremos capitalizar el cambio.

¿Cree que la política de Donald Trump puede ser una oportunidad para un mayor desarrollo del mercado local mexicano o cree que México necesitará buscar otro gran aliado?

Considero que todo cambio es una oportunidad para el desarrollo y que México no debe cerrarse ni ahora ni en el futuro, a la búsqueda de aliados comercial.

Entrevista con Daniel del Río – Basham, Ringe y Correa

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Daniel del Río

Partner en
Basahm, Ringe y Correa

 1. Una vez finalizado el año, ¿qué balance haría del mercado transaccional mexicano en 2016? ¿Considera que las cifras obtenidas son positivas?

La tendencia del mercado mexicano siguió la tendencia mundial, donde el número de operaciones fue un poco menor al del 2015. Sin embargo, podemos decir que la tendencia fue positiva, habiéndose incrementado el número de operaciones de menor cuantía (pequeñas y medianas).

2. El mercado transaccional mexicano está muy marcado por su interacción con otras economías, principalmente Estados Unidos. Como experto en relaciones transaccionales entre empresas mexicanas y empresas foráneas, ¿cree que el factor Donald Trump puede tener una incidencia elevada en el mercado de fusiones y adquisiciones mexicano? ¿Qué países o regiones podrían recoger el testigo de Estados Unidos como socio de referencia de México?

Efectivamente, la relación comercial con Estados Unidos es muy fuerte. Dependemos mucho de ellos al exportar el 80% de nuestros productos, por lo que el factor Trump puede afectar el comercio entre los dos países. Este factor podría afectar a empresas norteamericanas que trasladen sus operaciones a México; sin embargo, considero que no obstante se revise NAFTA, seguirán habiendo oportunidades de inversión que aproveche este mercado, teniendo en consideración varios factores, como lo son la cercanía con los Estados Unidos, la mano de obra cualificada de los mexicanos, su disciplina y la diferencia en costos, principalmente por la devaluación del peso frente al dólar que hemos sufrido en los últimos 18 meses.

“ El factor Trump puede afectar
al comercio entre México y Estados Unidos ”

3. El sector más relevante del mercado mexicano en lo que va de año es el inmobiliario, seguido a cierta distancia por los sectores Financiero y Seguros y de Distribución y Retail. ¿Cree usted que la aparición de la Fibra E puede hacer aparecer sectores de infraestructura y energía en este pódium en los próximos años?

Aunque la creación de la Fibra E fue anunciada en septiembre de 2015, a la fecha, el único proyecto de Fibra E que ha sido dado a conocer por el gobierno federal fue en el mes de octubre de 2016 por una empresa denominada Promotora y Operadora de Infraestructura (Pinfra). Dicha Fibra E tendrá como propósito principal el fondeo de inversiones relacionadas con la autopista México – Toluca.

Para el año 2017 se espera que la E-Fiber, sobre todo en proyectos de energía e infraestructura, tenga un crecimiento importante.

Según información de la Comisión Nacional Bancaria y de Valores, para el año 2017 se espera que Petróleos Mexicanos (PEMEX) y la Comisión Federal de Electricidad (CFE) sean emisores de Fibra E.

Durante 2016 la Fibra E en proyectos de PEMEX y CFE se vio retrasada, principalmente debido a las reestructuras que cada una de dichas empresas enfrentaron, sin embargo, CFE ya había anunciado dicho instrumento como mecanismo de monetización de nuevos proyectos principalmente en activos de transmisión por montos de aproximadamente 10 mil millones de pesos.

Asimismo, durante 2015, año en el que se anunció la creación de la Fibra E, PEMEX anunció que realizaría un análisis detallado de los activos que podrían monetizar a través de éste instrumento, principalmente en activos relacionados con downstream and midstream.

Conforme a lo anterior y derivado del entorno global, es muy posible que, durante 2017, así como en los próximos años, empresas como PEMEX y CFE realicen colocaciones en la Bolsa Mexicana de Valores, de proyectos de energía bajo el esquema de la Fibra E, con el propósito de monetizar sus activos.

4. Continuando con la Fibra E, y en relación a su experiencia en Derecho Ambiental. ¿Cree usted que la inversión en infraestructuras y energía, dos sectores invasivos con el medio ambiente, se traducirán en un incremento de demanda de esta práctica del Derecho?

Definitivamente la demanda de servicios legales en materia ambiental se ha incrementado desde hace algunos años y los nuevos proyectos infraestructura y energía la incrementarán aún más. El fortalecimiento de la regulación en la materia, su aplicación cada vez más efectiva por parte de las autoridades, así como los estándares corporativos que voluntariamente implementan muchos de nuestros clientes, han provocado y provocarán que, con mayor frecuencia, nuestros clientes requieran los servicios de especialistas en esta rama del derecho, para poder enfrentar con efectividad los retos de una regulación cada vez más amplia, especializada y compleja.

Es innegable que cualquier proyecto de energía o infraestructura tendrá impactos en el medio ambiente y por ello es importante lograr un equilibrio entre la protección del medio ambiente y los beneficios económicos y sociales que el proyecto tendrá.

Hablando específicamente de los proyectos de energía, en el campo del petróleo y gas, con motivo de la reforma energética aprobada en el año 2013 en México, se creó la Agencia de Seguridad, Energía y Ambiente (ASEA) que es un nuevo ente facultado para regular y supervisar las actividades del sector hidrocarburos y asegurar que éstas se lleven a cabo con apego a las disposiciones en materia de seguridad industrial y protección al medio ambiente.

La ASEA ya ha comenzado a emitir importantes disposiciones administrativas de carácter general en materia de: seguridad industrial, operativa y de protección al medio ambiente en actividades de reconocimiento, exploración y extracción de hidrocarburos; seguros para empresas que realicen actividades de exploración y extracción de hidrocarburos; operación de estaciones de servicios, etc.; disposiciones que se sumarán a un ya de por sí extenso y complejo marco regulatorio.

En conclusión, la regulación ambiental está presente en todas las etapas de un proyecto, incluyendo, los de energía e infraestructura, desde la selección del sitio, su construcción, operación y desmantelamiento. Cada una de estas etapas requiere de la obtención de licencias y/o de la preparación y presentación de reportes periódicos ante las autoridades ambientales o bien de la evaluación de criterios ambientales establecidos en planes, programas o normas de observancia obligatoria. En este sentido, la intervención de abogados especialistas en la materia de medio ambiente, se torna necesaria para garantizar que los proyectos se realicen en tiempo y en estricto cumplimiento a las disposiciones ambientales vigentes.

“ La demanda de servicios legales en materia ambiental se ha incrementado desde hace algunos años ”

5. ¿Se mantendrá el ritmo del mercado transaccional mexicano durante 2017?

Por el momento, lo que se podría esperar del ritmo del mercado transaccional mexicano durante 2017 resulta incierto, sobre todo, debido al próximo cambio de gobierno en los Estados Unidos de Norte América y la expectativa que existe en torno a las medidas que el Presidente electo Trump pudiera llegar a anunciar para captar mayores inversiones en ese país, pero, sobre todo, para evitar la fuga de dichas inversiones a México.

Aunque según cifras de la Secretaría de Economía, existió una disminución en la captación de inversión extranjera directa en México durante el tercer trimestre del año 2016, también hay optimismo en cuanto al ritmo del mercado transaccional.

Según informes de TTR (Transactional Track Record), el mercado de M&A mexicano, durante el mes de noviembre de 2016, experimentó un panorama optimista con un aumento de 67% en el número de operaciones respecto al mes de noviembre del año 2015.

Las reformas estructurales en varios sectores de la industria en México, tales como la energética, así como la apertura de y fortalecimiento de ciertas actividades como la de la exploración y extracción de hidrocarburos, generación de energía eléctrica, y la industria automotriz, que en los últimos años ha logrado transitar a un esquema de mayor productividad, podrían ser factores claves para mantener y, en todo caso, incrementar el mercado transaccional mexicano en el 2017.

 

TTR Dealmaker Q&A – Moacir Zilbovicius

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TTR Dealmaker Q&A

September 2016

Kroton Educacional acquires Estácio Participações

USD 1.63bn

Moacir Zilbovicius
Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados

On 16 August 2016 Estácio Participações accepted Kroton Educacional’s USD 1.63bn takeover bid. Moacir Zilbovicius was part of the legal team at Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados that advised the seller in this monumental transaction.

Q: How did Mattos Filho land the advisory mandate and when was the firm retained?

A: We were engaged in the first week of June thanks to our relationship with Estácio’s board members and owing also to referrals from financial institutions involved in the deal.

Q: What prompted your client to explore strategic alternatives?

A: Both Kroton’s and Grupo Ser´s offers were unsolicited. As far as I know, Estácio was not pursuing strategic alternatives at the time. What ensued after Kroton’s offer was made public was basically the board members assessing the offer and pursuing the best alternative available for its shareholders.

Q: Beyond the economic factor, what made Kroton’s bid more enticing than Grupo Ser’s previous offer?

A: Several factors came into play, but, beyond the economic and strategic factors, one that played an important role was management´s assessment of the likelihood of shareholders from both companies approving the deal. 

Q: How does this transaction impact Brazil’s higher education landscape?

A: Both the Brazilian antitrust authorities and Ministry of Education are assessing the impacts of this deal, if any, and should issue their views on this, hopefully, sooner than later.

Q: What practice areas were critical in the deal and in what way did the transaction require Mattos Filho to employ its unique capabilities?

A: I am proud to say that Mattos Filho was involved in almost all of the recent merger transactions involving public companies in Brazil. This gives us not only a competitive edge, but also relevant know-how and expertise in handling such complex transactions. We have also actively participated in numerous deals involving corporations with no controlling shareholder or group, which enabled us to provide Estácio’s management with the specific guidance it needed to handle the unique situation it found itself in. Obviously, addressing the antitrust circumstances involved in the transaction was also highly important. We have a highly specialized antitrust group that allowed us to live up to the task at hand.

Q: What antitrust hurdles does the transaction face?

A: Though the deal was approved in the general shareholders meetings of both companies, it remains subject to the approval of the Brazilian antitrust authorities and Ministry of Education. The businesses of Kroton and Estácio are very complementary, in particular from a geographic standpoint, and the parties are confident that the necessary antitrust approval will be obtained in due course. 

Q: What distinguished this transaction from other M&A deals Mattos Filho has advised on?

A: The fact that it involved two companies with no controlling shareholder or group of shareholders, and that it was prompted by an unsolicited offer that led to competing offers from the market, and almost the launching of a tender offer by a relevant shareholder and member of the target´s board, made the deal very unique.

Q: How is the legal advisory work different in such a transaction where there is no controlling shareholder? 

A: Our work was mainly focused on advising the board of directors and the special committee that was created specifically to negotiate the transaction with Kroton.

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TTR Dealmaker Q&A – Hugo Rosa Ferreira

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TTR Dealmaker Q&A

April 2016

Bankinter acquires Barclays Portugal

EUR 175m

Hugo Rosa Ferreira 
PLMJ

On 1 April Spain’s Bankinter closed the acquisition of Barclays Portugal, marking its first foray beyond its home market. Hugo Rosa Ferreira led the PLMJ team that advised Barclays Portugal on the sale of its branch network, comprising commercial, private and corporate banking, along with asset management, insurance and pension portfolios.

Q: Why was PLMJ selected as the seller’s legal advisor?

A: The transaction relates to a Portuguese branch of the UK bank, so the seller needed local advice to structure the deal from a regulatory perspective and a transactional perspective. At the end of the day we had to transfer all the assets, including all the underlying contractual relationships governed by Portuguese law.

Q: How long has PLMJ been working with Barclays Portugal?

A: We had been advising the seller on a regular basis for six years. We were on retainer since 2011, although we began working with Barclays in 2010. We advised not only on the banking products but on restructuring the corporate loan book. That was the bulk of our work from 2010 to 2015. We also had a very large chunk of the corporate litigation and insolvency and restructuring of corporate clients. We also worked a little bit with Barclaycard and occasionally we provide some corporate banking advice.

Q: Why was the business structured as a branch network rather than a subsidiary?

A: It was a decision made when Barclays decided to come into Portugal. Under the EU banking directive it is a much easier process to establish a local branch rather than apply for a license. Barclays established a local branch network and grew organically.

Q: What prompted Barclays to exit Portugal?

A: The exit was made within the context of a more global strategy of withdrawing from smaller operations. It has been doing that in a few other countries such as Spain and Italy. Barclays exited Spain two years ago, and this deal falls within its global strategy of withdrawing from non-core continental European markets and focusing on its core operations.

Q: What made this transaction so complex?

A: The fact that we had to structure the deal as an asset sale rather than a share sale added complexity. In a traditional M&A deal you negotiate a traditional share purchase agreement. Since we didn’t have a company, we couldn’t sell the shares. We had to transfer each and every one of the contractual relationships, with clients, suppliers, tenants, landlords, each of those contractual agreements. We had to structure the deal in the most efficient and legally robust way possible. We had to identify all these contractual relationships to be transferred, how to do so without raising any regulatory issues and we had to try to mitigate any scenario where the counterparty would object. We had to structure the transfers differently for certain types of assets. For example, the retail banking business had one structure and the corporate banking business had another. Property and derivatives each had a specific legal structure. Most of the Portuguese operation was sold. The seller kept a little bit of core corporate and the Barclaycard business, which was its decision from the beginning.

Q: To what extent did clients object to the transfer of those contractual agreements?

A: Only an extremely small number of clients objected initially, insisting they wanted to keep their relationship with Barclays. Some were in litigation and for strategic reasons they didn’t want to transfer those contracts, or clients in default on their mortgage loans for example. There are several alternatives for those clients. Barclays has resolved nearly all the objections. Some of them required additional information. For those that really did want to stay with Barclays, there are solutions from a relationship standpoint. Barclays does have the ability to continue to serve those clients, but these really amount to a very small number. Most of the objectors were duly transferred since the deal closed, either they transferred to Bankinter or they were transferred to another bank. After all those were sorted out the number was even smaller.

Q: What practice areas were critical to closing the deal?

A: Banking and finance, property, employment, privacy and data protection. I would say that these four were the main practice areas that were paramount to the success of the deal. Others involved were competition, litigation and tax.

Q: How were M&A considerations incorporated into the asset sale structure?

A: although we had to structure the deal as an asset sale, we did have all the M&A type terms and conditions that you’d have in a share purchase agreement. We had everything transferred under an umbrella business sale and purchase agreement where we set out all the terms for the transfer. The transfer had to be carried out under specific types of agreements, but overall the terms and conditions are similar to what you’d find in an M&A deal, including price adjustments, warranties, covenants and conditions for indemnity, time frames for indemnities to begin and be waived, relieved. All those typical M&A conditions were brought into the deal under the framework agreement, although we had to transfer all the assets under specific transfer type agreements.

Q: What made these assets attractive for Bankinter?

A: This is Bankinter’s first expansion outside of Spain. Barclays had an established presence in Portugal. It has been in Portgual for at least 30 years. Barclays had a small-to-medium size operation in Portugal, which made it a good fit for what Bankinter was looking for in terms of expanding beyond Spain. It’s a small step towards becoming international, but it’s a reasonable and sustainable step for the buyer.

Q: How much competition was there for these assets?

A: There was a lot of interest from all types of potential buyers, from banks and investment funds, some of them looking to buy the entire operation, others part of the operation, including Portuguese and foreign banks, and mostly foreign funds.

Q: What made Bankinter’s offer the winning bid?

A: I believe that it was a combination of things. Bankinter did exactly what Barclays did when it entered the market to consummate the deal by opening a branch to acquire the assets. It “passported” its banking license from Spain. That was a relatively smooth detail. The fact that it was already an EU bank was a plus in its proposal, as some of the other bidders were not. Bankinter simply notified the Bank of Spain, which then notified the Bank of Portugal. It usually takes about four months to obtain the branch license.

Q: What conditions were imposed by market regulators for the deal to be approved?

A: None expressly as the deal was not subject to any conditionality. The deal was structured so that it was not subject to regulatory approval, at least the banking part. For the insurance part, the transfer of the portfolio was subject to regulatory approval, which was obtained. From the banking side, it was not, but implicitly we had to follow the principle of neutrality, in that it had to be neutral to all clients, and that was expressed in all the documents of the transaction itself and in the documentation used to seek the approval of clients. That was the only rule, not a written rule, but it was something that we had to follow. Although we didn’t need approval, we were in constant contact with the Bank of Portugal to keep the regulator apprised.

Q: Beyond the EUR 175m purchase price, what other investment does this deal imply?

A: The bank needed to be funded, so Bankinter had to provide the funding that was released to Barclays. On closing, Barclays UK no longer had to fund the bank, whereas conversely, Bankinter needed to inject the funds required to comply with capital requirements, which implies around EUR 2bn.

Q: What does this sale mean for Portugal’s financial services sector?

A: It’s an example of the appetite that the market has for Portuguese banks. The Portuguese banking market was traditionally concentrated among four or five large banks. One of them was Banco Espirito Santo, which was subject to resolution. Another, BCP, has been under distress for years now, while BPI and Caixa are also not in good shape. This presents an opportunity for foreign banks to establish themselves in Portugal with a solid operation. This deal shows there’s appetite for the Portuguese banking market, especially for these kinds of transactions.

Q: What has buoyed interest in the sector despite systemic problems?

A: The financial sector’s problems are the result of bad management and fraud. The problem is not with the customer base; the problem is with management. This deal is absolutely a positive indicator. There’s a discussion whether to completely open the market to foreign investors. There’s no restriction on foreign ownership, it’s more of a political issue with the left wing parties raising concerns. We’ve seen that the traditional Portuguese banks were not well managed. There are some examples of foreign banks coming in and being successful, such as Santander, one of the soundest, if not the soundest, bank in Portugal, and Deutsche Bank, which is also very successful in Portugal with certain types of clients. I don’t see any reason why banks wouldn’t open themselves to foreign investment. Where such investment has been made, it’s been positive. We will soon see the sale of Novo Bank, likely to a foreign bank or investment fund. There’s talk about consolidation among the market’s largest four or five banks, which are those that are in worst financial shape. The market is very much alive and I’m sure we’re going to continue to see, if not this type of transaction, large holdings in Portuguese banks sold to foreign investors in the next 12 to 24 months.

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TTR Dealmaker Q&A – Alessandro Farkuh (Banco Bradesco BBI)

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TTR Dealmaker Q&A

January, 2016

J&F Investimentos acquires Camargo Corrêa´s 44% stake in Alpargatas 

USD 672m

Alessandro Farkuh 
Banco Bradesco BBI

On 23 December, J&F Investimentos closed the acquisition of a 44.12% stake in Brazil’s leading footwear manufacturer, Alpargatas, from Camargo Corrêa, a month to the day after the transaction was officially announced. Alessandro Farkuh, Head of Mergers & Acquisitions at Banco Bradesco BBI, led the investment banking team that advised the seller on its exit from the shoe business, which was unconditionally approved by Brazilian regulator, CADE.

__________________________________________________________________________

Q: How did Bradesco BBI land this mandate?

A: We have been advising Camargo Corrêa in several transactions. Bradesco BBI has been the investment bank of the CCSA group. As it regards Alpargatas, specifically, we have led every M&A transaction for them since 2012, including its 60% acquisition of Osklen, currently one of its most important brands, together with Havaianas. We advised the acquisition of 30% in 2012 and then, at the end of 2014, we helped Alpargatas exercise its option to acquire another 30% and consolidate the control of Osklen. We also helped them in the negotiation to renew the licensing agreement with Mizuno for 26 years, as announced in 2014. Finally, most recently we worked for them on two parallel fronts; on the one hand helping Camargo Corrêa to sell its controlling stake, and on the other hand working with Alpargatas to sell the businesses units related to its Topper and Rainha brands.

Q: What prompted this transaction?

A: Our client was seeking liquidity; that was the principles reason. The rationale behind putting Alpargatas in the street was purely an economic decision, to strengthen Camargo Corrêa’s financial position.

Q: Why was Alpargatas the chosen divestiture candidate?

A: Camargo Corrêa is a large portfolio manager. We see CCSA transforming itself, in essence, into an investor group which manages a portfolio of sizable investments. They have the power business, the cement business, the transport/concession business, textiles, very different business units that are not necessarily dependent on each other. At the middle of last year, Alpargatas was the most viable asset Camargo Corrêa had that could be sold. It didn’t depend on any third party or shareholder. It’s a company that’s been performing well for several years and profitable enough to justify a sizable amount of proceeds. Also, we were confident that announcing the sale of its Topper and Rainha brands, given those operations were not exactly aligned with the strategy of Havaianas, Osklen and Mizuno, would help to propel the sale process. In hindsight, I’m 100% sure they made the right decision.

Q: How was the transaction structured and presented to the market?

A: Alpargatas was extremely well organized and 100% professionalized. We were conducting the transaction at Camargo Corrêa’s level and putting a lot of energy to minimize any interference on the company’s day-to-day operation. We were there organizing the information to support a truly competitive process. Due to market rumors, our client decided to formalize the transaction through a stock exchange announcement in August and confirmed we were helping; once that happened we needed to expand access to an even larger number of interested parties. The transaction attracted several large financial and strategic investors, with local and global operations. As in any relevant transaction similar to this one, at the end of the day we had some guys with a lot more focus on the process than others. We saw strategic buyers trying to join forces with financial investors; global companies and global funds with widely different profiles. The one that was most agile, that understood our concerns and how we were trying to speed up the process, ended up acquiring the company.

Q: How would you describe the pool of suitors?

A: Havaianas is a global brand. It’s one of the very few brands that can be recognized anywhere in the world. It has operations in all continents. When you talk about selling Havaianas and all the other brands of Alpargatas’ portfolio, every group focused on luxury consumer products globally, Americans, Europeans, the most important players related to consumer products, demonstrated interest. We were being extremely selective to make sure everybody who came into the process had the conditions to write the check we sought and to assess the asset quickly. Considering the fact that it was almost a BRL 3bn transaction, it required a lot of energy from the interested parties to justify putting that amount of money in Brazil, to minimize execution risks, and to make sure they were doing the right transaction based on the right terms, so you had a lot of groups coming together to form consortia.

Q: How did you avoid selling the asset on the cheap in a down market?

A: This is a true example of where despite all the uncertainties and concern about Brazil, if you apply the right pressure in the process, define the right tactics of negotiation and base the rationale of the transaction on the right elements, you can maximize value and accelerate speed of execution. We obtained an extremely reasonable premium, comparing the announced BRL 12.85 share price, with the unaffected price per share of Alpargatas (as of August/2015). The whole concept we brought to investors was related to a company that was performing very well on top of the Brazilian contribution to revenues. It’s a global brand and most of its potential is related to its international expansion. The main idea was to try to take some advantage of the Brazilian situation, where the currency was increasing some attractiveness assuming the price per share in US dollars, and on the other hand to maximize the valuation of the company based on the potential to expand its operation in regions where there is still significant growth potential. If you look at Alpargatas, though it has an Asian presence, it’s not yet where it could be, same goes for the US, it’s not yet consolidated. Brazil still represented the largest contribution to sales in 2015. This is exactly the opportunity. The valuation wasn’t only based on the past performance of Alpargatas. Considering how aggressive the profile of the new controlling shareholder could be, the ratio of domestic versus international sales could be changed quickly.

Q: Why was J&F Investimentos the best buyer for the asset?

A: J&F is extremely aggressive and extremely competent in terms of doing sizable transactions like this one. J&F was at the same level as anybody else in the process, we considered them global investors. They were the ones that really understood how important it was to close the transaction with great speed and at the same time, indicated an attractive price that balanced the final elements for our client. But apart from the economics of the deal, their ability to meet the speed and agree with the very specific conditions we demanded to increase certainty of closing made J&F the right choice; it was clear to them that once we announced the transactions we couldn’t go anywhere but the closing. They were fast, and highly intelligent to translate our requests and support a very efficient negotiation process. We announced the transaction in less than two weeks after receiving the bids which is a testament to how aggressive we were and how competent J&F was.

Q: What factors were most important in selecting the winning bidder?

A: There were two main variables for us: first the price and second how long it would take for our client to receive the cash. If it takes three months longer to receive the proceeds of the deal, over time with interest rates as they are, it would not be the same for Camargo Corrêa. We were basing the process on these two elements, speed and pricing, and J&F was the most efficient player in balancing those two elements.

Q: How was it closed within such a short timeframe from the announcement date?

A: It was extremely intense; as intense as the negotiation period between receiving bids and announcing the winner. Between 22 November and 23 December all resources were related to antitrust approval processes and final documentation. That previous two-to-three-week period immediately before the announcement took an immense amount of energy. I was pretty much dedicated with the rest of the group to this transaction. We were negotiating with the final interested parties 24×7, managing pressure from the process and the natural expectation of our client. It was a pretty engineered process, in-house and on everything related to the interested parties.

Q: Why was this an opportune time for Camargo Corrêa to exit?

A: It was absolutely a good time to sell. When we look back to last year, I doubt we could see similar competition for any other transaction in Brazil. We had the full attention of the bidders. Despite the Brazilian macro conditions, the high quality of Alpargatas could neutralize that situation; we could put it aside a little bit to execute the process. During most of the time we were negotiating the deal we had all the attention of the investors. We felt from the most engaged and interested parties, that they were seriously dedicated to that transaction. I believe the decision of seeking liquidity and pursuing the divestment by Camargo Corrêa, put the deal in a very good environment by being the biggest and most interesting transaction in the market. It was very intelligent timing to put the asset up for sale; our client had very strategic vision by accepting the recommendation to sell Alpargatas at that moment. It was the reference transaction for any sizeable investor in that industry looking to Brazil.

Q: What are the synergies for J&F Investimentos?

A: This was an opportunistic approach from J&F. They do invest in companies and opportunities that could be explored globally. I see them putting resources towards things that can be grown, like the protein, processed food, pulp and paper businesses and other ventures with great growth potential. From my perspective I can’t judge or make assessments based on any synergy, other than good economics based on what they can generate as returns in the near future.

Q: Is it an asset that unsuccessful strategic investors will continue to court?

A: Alpargatas was being approached by everybody for years. It was not new to Camargo Corrêa that a lot of people would be interested. I would bet that similar flow of interested parties will continue with J&F, but now you will have a different value reference. The price per share so far was not reflecting the true value of the company. I would assume people will continue approaching J&F as they had with Camargo Corrêa for years, but with a different mindset – knowing what they paid. I see J&F with a very aggressive and consistent plan of expansion, which was the true element for the pricing of the company. They will invest a lot of energy to bring Alpargatas to the next level. The company has great management, a beautiful legacy, a lot of know-how in doing what they do; all of that combined with the experience of J&F working abroad could be explosive. I do believe they will do a great job.

Q: Did the volume of shares acquired surpass the threshold requiring a public tender offer for the remaining shares?

A: It does on the common shares. J&F will need to launch a mandatory tender offer for the other common shares to fulfill its legal obligation.

Q: Which firms advised J&F on the deal?

A: None, it was handled internally. That is the way they do deals, they use their internal team. They are extremely competent and smart and have a distinct view of negotiation processes. I think that was one of the reasons J&F ended ahead of other bidders. The team involved in the deal was part of the decision-making process and, at the same time, responsible for conducting the front lines – they could rapidly pull together the relevant information for their assessment throughout the process.

Q: How does this transaction stand out from other deals you’ve led?

A: It’s a very special deal. It’s for sure one of my most relevant transactions so far; and it is not a matter of size or execution complexity. This transaction comes after a sequence of successful M&A transactions completed with Alpargatas in a window of about five years. I can’t recall in Brazilian M&A history a similar situation. To announce five or six M&A transactions and then be able to sell the company the way we did; from any angle it cannot be considered anything but a good transaction, and in a terrible macroeconomic situation, at that. The sale of the controlling stake of Alpargatas is a final piece of a long history in which I personally was involved, beginning with the acquisition of Osklen. Looking back and seeing the importance the other initiatives had in bringing this to reality makes this transaction even more special. Bradesco BBI was the partner management trusted to help them, and the trusted advisor responsible to translate those transactions into reality in the eyes of the shareholders. I was fortunate to be the person to lead all those initiatives. It is truly a win for Camargo Corrêa, for Alpargatas’ management, and obviously for Bradesco BBI to lead this deal in such a complex macroeconomic environment.

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