China becomes the largest investor in Brazil
As one of the BRIC countries, Brazil was projected to continue to be one of the fastest growing economies in the world. However, the 2015 recession in Brazil resulted in a negative growth rate of 3.8%. As a result, Brazil slid from seventh to ninth place in the world economies ranking.
Year-to-date, Chinese companies have already purchased US$4 billion of assets in Brazil, the highest level since 2010. According to Bloomberg, the top five countries investing in Brazil are China - 1st, US – 2nd, Norway – 3rd, Mexico 4th, UK – 5th.
The Brazilian currency, the Real, has depreciated more than 50%, which has enhanced Chinese and US purchasing power in terms of investment. It’s also important to note that as compared to the US, China has experienced less political resistance when acquiring Brazilian assets.
Some notable transactions where Chinese companies made acquisitions in Brazil:
China Investment Corp., which has a US$814 billion sovereign fund, is leading a Chinese investor group that is in talks to complete a multibillion-dollar iron-ore streaming deal with Brazil’s Vale SA. The consortium is negotiating the potential purchase of a portion of Vale’s future iron-ore output for as long as 30 years. Vale could fetch about US$9 billion upfront from the sale.
State Grid Corp of China, the world’s largest electricity provider by revenue, is wooing shareholders of Brazil’s CPFL Energia SA and a listed subsidiary. It expects to secure stakes from large shareholders before making an offer for the entire company.
The Fosun Group, a major China-based investment group, with operations in several countries, signed an agreement to acquire Rio Bravo Investimentos.
Shanghai Pengxin Group Co. purchased control of Brazilian grains trader Fiagril. People familiar with the deal said the value of the deal could be around 1 billion Reais (US$290 million). Shanghai Pengzin, like most foreign buyers would keep current management in place.
Versailles Group is a 30-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures. Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million. Versailles Group has closed transactions in all economic environments, literally around the world.
Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.
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September 19, 2016
