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Capital Markets

Corporate finance: Asian firms come in search of LatAm M&A

Bankers expect more deals; Opportunities in natural resources

Although the trade links between Asia, especially China, and Latin America are now well established there has been little activity at corporate level between the two regions. That is beginning to change.

Last month, Sinochem, a Chinese state-owned oil company, bought a $3 billion stake in a Brazilian offshore oil field. The field is owned by Norway’s Statoil and marks the first big energy investment made by the Chinese in Latin America’s biggest economy.

Bankers believe there will be more similar transactions this year. "We’re convinced that we will see more Chinese companies buying in Latin America," says Daniel Hagge, head of corporate finance for Brazil at BNP Paribas.

Iron ore deal

The French bank was involved in another recent China-Latin America transaction, in which Wuhan Iron and Steel Corporation acquired a 21.5% stake in MMX, the iron ore company owned by Eike Batista, for R$700 million ($378 million). As part of the deal, Wuhan signed a formal agreement with EBX, Batista’s holding company, to set up a steel mill joint venture in Brazil with an annual capacity of 5 million tonnes. Wuhan’s total investment was more than $5 billion.

"We expect quite a bit of Chinese investment channelled through a handful of companies"

Nicolas Aguzin, JPMorgan

Hagge says that one of the issues in managing Chinese-Brazilian transactions is the amount of time that’s required bridging cultures and getting both sides comfortable.

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