In recent months big multi-national private equity firms like The Carlyle Group and Advent International have been busy in Brazil, setting records in fundraising and deal sizes. But as the high end of the market becomes increasingly competitive, smaller deals are being overlooked, according to FAMA Investimentos founder Mauricio Levi.
The equity-focused asset manager plans to take advantage of this perceived equity gap with a new sector-agnostic private equity fund that will target small to mid-sized companies in southeastern Brazil. The strategy is complementary to FAMA's activities in public equities, Levi says. The 15 year-old firm, which currently has $1.3 billion (?872 million) in assets under management, takes positions in small to mid-sized companies for its long-only portfolios.
FAMA has hired three professionals to manage the private equity fund, and is currently planning to raise between $150 million to $200 million, Levi says.
The team is led by Andre Burger, formerly executive director of Brazilian private equity and venture capital firm Companhia Riograndense de Participações. Working with Burger will be Guilherme Luz, a former attorney at Skadden, Arps, Slate, Meagher & Flom, where he focused on mergers and acquisitions, and another undisclosed individual.
FAMA hopes to wrap up fundraising by the end of April this year, Levi says. FAMA has hired Credit Suisse to advise on fundraising from domestic sources, which are expected to account for between 70 and 80 percent of the total capital. These investors will mainly be high net worth individuals, Levi says, adding that some are already investors in FAMA's hedge funds. Foreign limited partners, which can participate through an offshore sidecar vehicle, are expected to be mainly institutional investors.
The fund will have a two-year investment period, during which time FAMA plans to back around eight companies. The first investment will likely be completed by the middle of the year.
Says Burger: “We think that in most cases of private equity activity in Brazil, there is a lack of operational expertise. We will have a very hands-on approach; we think that is something that will differentiate our fund.”
DARBY HIRES FORMER ELECTRA MD
Darby Overseas Investments, the private equity arm of Franklin Templeton Investments, has hired Diane Smith to head its Latin American mezzanine business. Smith was most recently a managing director at listed UK private equity firm Electra Investments. Smith led Electra's expansion into Latin America in the late 1990s, establishing fund management companies with local financial partners in Argentina and Brazil, as well as raising third-party funds for those countries. Smith's hire is part of Darby's larger plan to significantly increase its Latin American mezzanine business through the establishment of several additional regional and country-specific funds, the firm said.
GP INVESTMENTS INVESTS IN THREE HOTELS
GP Investments has set up a $150 million (€102 million) vehicle for investing in the Latin American hotel sector. The vehicle, LAHotels, was formed with capital from GP Investments' fourth private equity fund, and has already acquired stakes in three Rio de Janeiro hotels: a 100 percent stake in Luxor Regente and Luxor Continental, and a 25 percent stake in Luxor Copacabana. “GP Investments saw the opportunity to enter the Brazilian and Latin American hotel market and to benefit from the tourism sector outlook, which shows strong demand fundamentals,” the firm said in a statement.
CONDUIT EARNS 2.3X ON FIRST FUND
Conduit Capital Partners, which invests in Latin American infrastructure assets, has fully exited its first fund with the sale of three portfolio companies: diesel-fired generating facilities operator Jamaica Energy Partners; Colombian gas-fired thermal power facility Mamonal; and Peruvian natural gas facility Aguaytia. Conduit's Latin Power I closed on $100 million in 1993, and will return an estimated 2.3 times committed capital, generating an internal rate of return of 10.8 percent. Conduit's second fund, Latin Power II, which closed on $157 million in 1998, holds just one remaining asset, and is poised to return more than 2.5 times committed capital.
HARVARD ACQUIRES STAKE IN BRAZILIAN ASSET MANAGER
Harvard University's endowment fund has taken a 12.5 percent stake in Gavea Investimentos, a Brazilian asset manager with $5.5 billion (€3.7 billion) under management. Gavea will use some of the sale proceeds to launch its third private equity fund, according to Bloomberg, which will invest in a portion of Harvard's private equity portfolio, in addition to Brazilian companies. The remainder will be invested in its domestic and offshore hedge funds and wealth management division.
JP MORGAN SPINOUT TO BUY ING CHILEAN UNIT
Dutch financial services company ING Groep has agreed to sell its Chilean health insurance unit, ING Salud, to a consortium of Chile's Said family and Linzor Capital, a spinout from JP Morgan Capital Partners Latin America. Each party will own 50 percent of the unit, which is Chile's third-largest health insurance company. The Said family will contribute all of its healthcare industry holdings to the new venture, including Chilean health insurer Normedica and several clinics. The venture will operate under the Cruz Blanca brand after the deal closes.
NEXXUS BUYS STAKE IN MEXICAN CONSUMER FINANCE COMPANY
Mexican private equity firm Nexxus Capital has acquired a minority stake in Crédito Real, a consumer financing company with $132 million (€90 million) in assets. Crédito Real will use the investment to pursue acquisitions and mergers with other non-bank financing companies. “The non-bank financing industry in Mexico is rapidly growing and a considerable part of the market still remains untapped”, Nexxus said in a statement. Nexxus made the investment from its third private equity fund, currently in the market with a $250 million target.
MEXICAN FIRMS BUY COLORADO COMMUNICATIONS COMPANY
Private equity firm NAFTA Fund of Mexico and Mexican conglomerate Arancia Industrial have paid $4.75 million (€3.2 million) for a minority stake in Road 9, a Colorado-based company that provides next-generation telecommunication and entertainment services to residential developments in the US and Mexico. The investment will be used to finance Road 9's continued growth, particularly in the Mexican market, NAFTA Fund partner Jaime Serra said in a statement. NAFTA Fund was founded in 1993 to invest in companies that can benefit from conditions created by the North American Free Trade Agreement. Serra was involved in the negotiation and implementation of the treaty in Mexico.