In October, Advent International acquired Mexican funeral services company Grupo Gayosso. The firm is Mexico's largest in its sector, with 25 funeral homes, 21 cemeteries, 16 chapels, 12 crematories and 6 mausoleums. There are clearly profits to be made from the after-life, a fact that bankers to the $317 million (€218 million) deal have not been slow to recognise.
The transaction included $195 million in debt financing from Scotiabank of Canada and Ontario Teachers' Pension Plan, as well as a $40 million subordinated loan with an eight-year bullet payment that Advent said was “a first in Mexican private equity”. A bullet loan, unlike an amortised loan, is repaid all at once on a specified maturity date rather than in installments.
“The landmark deal illustrates the banks' confidence in Gayosso as well as the long-term stability of the economy and Advent's proven track record in the market,” an Advent statement proclaimed.
Since the banking crisis in the mid-1990s, few private equity deals have been able to find debt financing in Mexico. Though the country's debt capital markets have been stable in recent years, lenders have still preferred safer investments.
But Advent has been a trailblazer in using leverage to finance its acquisitions in the country. Its acquisition of Mexican home builder Corporativo Javer this July, understood to be worth around $750 million, was financed with both debt and equity.
In May, Advent's $220 million buyout of discount clothing retailer, Controladora Milano, was the first mid-market private equity deal in Mexico to use leverage based on cash flow rather than assets. Standard Bank of South Africa and Scotiabank of Canada co-led a group of Mexican and international banks in providing $90 million of debt financing for the deal.
Advent has also promoted the use of leverage in other Latin American countries. For example, the firm used “significant” leverage to finance its $500 million buyout of Brazilian duty-free retailer Brasif in March 2006.
Advent's regional rival GP Investments has also closed two large buyouts it would have been unable to consider when its transactions were wholly financed with equity. The firm's recent $1 billion acquisition of mining company Pride International included $600 million of debt, and its $625 million acquisition of refractory materials producer Magnesita included a $318 million debt component.
Leverage, it seems, has taken root in Latin American private equity.
ACON IN 13.5X BRAZILIAN SUPERMARKET EXIT
US private equity firm ACON Investments has sold Brazilian supermarket chain GBarbosa to Chilean supermarket retailer Cencosud. ACON did not disclose the size of the deal, but an industry source said ACON's return was 13.5 times its original equity investment. ACON bought GBarbosa from Dutch supermarket operator Royal Ahold in March 2005. The deal is ACON's second exit from a Latin American supermarket chain. In August 2006, the firm sold its 35 percent stake in Colombian food retailer Carulla Vivero to Alamacenes Exito for approximately $245 million, earning a four times return on its initial investment.
GEM, FIDUCIARIA BOGOTA LAUNCH COLOMBIA FUND
The Global Emerging Markets Group (GEM) is launching a $220 million (€152 million) private equity fund in partnership with Fiduciaria Bogota, the asset management arm of Banco de Bogota. The fund will make growth and expansion stage investments in small to mid-sized businesses based in Colombia. Juan Pablo Ospina, formerly the director general of Small Enterprise Assistance Funds Colombia, will manage the fund. GEM's limited partners have contributed $200 million to the fund. Fiduciaria Bogota will contribute at least $20 million to the Colombian domiciled fund.
FIRST DATA STRENGTHENS BRAZIL PRESENCE
US LBO firm Kohlberg Kravis Roberts has added on Brazilian payment processing company Check Forte Processamento de Dados to its portfolio company First Data. KKR acquired US electronic payments business First Data for $24 billion (€16.5 billion) in April. The company has conducted business in Brazil since 2002, and has an office in Sao Paulo. “This acquisition will allow First Data to build on its existing strengths and provide an extended portfolio of products and services to the Brazilian marketplace,” said First Data's president of Latin America and Canada, David Yates, in a statement.
GP INVESTMENTS MATCHES FUND RECORD, OPENS IN MEXICO
GP Investments has closed its latest private equity fund, GP Capital Partners IV, on $1.3 billion (€917 million) of committed capital, matching the region's previous fundraising record held by Advent International. Antonio Bonchristiano, co-chairman and co-chief executive of the firm, told sister website PrivateEquityOnline.com that the fund attracted a number of “prominent new investors” in addition to a number of existing limited partners. For the first time, the firm – as well as the region – attracted Asian and Middle Eastern investors. The partners of GP Investments have committed $400 million to the vehicle, and a further $30 million of commitments came from the employees of the firm. Separately, GP Investments has opened an office in Mexico City, the first stage of the Brazilian firm's pan-Latin America expansion. Marcio Tabatchnik Trigueiro, a partner at GP Investments since 2001, will lead the new office.
ADVENT CLOSES RESTAURANT DEAL
Advent International has agreed to buy Brazilian casual dining chain Viena for an undisclosed amount. Viena operates 60 restaurants in Sao Paulo and Rio de Janeiro. The deal follows Advent's acquisition of Mexican casual dining chain La Mansion in 2004 and airport restaurant concession operator Grupo RA this April. Advent plans to integrate several of the operational processes of Viena and Grupo RA, and expects to create synergies between the two companies' brands. Advent will also grow Viena through new restaurant openings and acquisitions.
CONDUIT IN MEXICAN HYDROELECTRIC SALE
equity firm focused on Latin America and the Caribbean, is planning to sell three hydroelectric plants in Mexico to Italian electricity company Enel. Robert Deambrogio, head of renewable energy in Enel's international division, told reporters at the World Energy Conference in Rome that the deal will close by the end of the year, according to Reuters. Deambrogio did not reveal the value of the deal, but said Enel would spend “a few hundred million euros” in total for its planned expansion into Mexico and Central America.