Latin Finance - January/February 2011 - 44

DEALS of the YEAR
2010

This was a 1.9% discount to the previous preferred close of 26.80 reais. It was 2.0% below the ordinary share close at 30.25 reais. The totals include a 10.5% overallotment of ordinary shares from a possible 25.0%, and 17.8% additional preferred units, also out of a possible 25.0%. The ordinary shares were at 27.33 reais November 15, and preferred at 25.40 reais. Besides BAML, Bradesco, Citi, Itaú, Morgan Stanley and Santander were global coordinators, with Banco do Brasil on the domestic retail portion. BTG Pactual, Credit Agricole, Credit Suisse, Goldman Sachs, HSBC, JPMorgan and Société Générale were on the trade as joint bookrunners. Espirito Santo, Deutsche, Safra and Votorantim were co-managers. All put in a lot of work for just 0.21% of the total size of the o ering in fees. LF

what China is after in the region, and what is to come in the sector in the next few years,” says Barreda. SinoLatin was not on the transaction. Hopu Investment Management advised CNOOC while JPMorgan advised Bridas. It was funded with CNOOC’s internal resources. The March deal gave it 20% of PAE, marking one of the few instances in which a Chinese buyer has taken a minority stake

according to Barreda. “You have the Chinese looking for opportunities in Venezuela, for instance, when no one else will,” he says. “When it comes to political risk, they tend to stomach risks that a common investor wouldn’t.” The price of the transaction, at approximately $10.6/boe of possible and probable reserves, does represent a signiﬁcant discount to similar investments in Brazil, Barreda says. Sinochem’s stake

Cross Border M&A Deal
CNOOC-Bridas

China Gets to Work I

Divining value in Argentina: CNOOC places large bets in a LatAm target. According to Dealogic, of the 40 China-LatAm deals prior to Bridas, only eight involved Chinese companies taking a minority stake. Since then, almost half of acquisitions of LatAm targets by Chinese acquirers have involved sub-50% positions. Convincing CNOOC management of the virtues of a minority stake meant also getting it comfortable with Argentina. The Latin American Venture Capital Association (Lavca) gives Argentina a score of 43 out of 100 on the attractiveness of its investment environment. This is “due to an increasingly complex and high-tax environment,” alongside “perceptions of corruption in politics, along with bureaucracy and lack of a strong policy framework.” However, China has a stronger appetite for risk than many other investors, in Peregrino Field, for example, implies a valuation of $15.35/boe of possible and probably reserves. “I think that suggests that a sovereign discount was embedded in the transaction value [of Bridas],” Barreda says. CNOOC seems to have accepted the virtues not just of Bridas, but of the Argentine oil and gas sector as a whole. The oil major also says it plans to use the deal as a launch pad for further LatAm expansion. Indeed, in November, Bridas bought the rest of PAE, excluding its Bolivia assets, from BP. “After the transaction and with the world-class oil and gas asset portfolio and existing excellent management team of PAE, we’ll be able to enhance our presence in the region, which will beneﬁt us in the short-term and long run,” says Yang Hua, vice chairman and CEO of CNOOC Limited.

n a year of signiﬁcantly increased Chinese buying of LatAm assets, CNOOC’s purchase of 50% of Bridas was one of the largest South-South deals. In March, state-owned CNOOC announced its investment in Bridas for $3.1 billion in cash. Until Bridas unveiled in late November it would pay $7.06 billion for BP’s 60% stake in Pan American Energy (PAE), the March transaction was the biggest M&A deal in Argentine oil & gas since 2000, according to Dealogic. “It was a bold move by the Chinese,” Jorge Barreda, partner at SinoLatin Capital, an M&A advisory ﬁrm that specializes in Asia-LatAm investments, tells LatinFinance. Both the size of the deal and CNOOC’s willingness to take a minority position in a country traditionally seen as high risk are indications of how far China will go to secure natural resources. “It symbolizes

44 LATINFINANCE

January/February 2011

Latin Finance - January/February 2011

Table of Contents for the Digital Edition of Latin Finance - January/February 2011