Brazilians acquisitions abroad top Multinationals buying in Brazil, says Estadão

The good shape of Brazilian companies turned them into buyers globally. This year, the balance of acquisitions is positive to Brazil.  Favored by a strong currency they are going shopping everywhere in the world. But it is not all. Most important is to notice that the Brazilian entrepreneur have manage to go out of the shell of domestic market and dare to compete in different and more challenging environment. Jornal Estadão (short for Estado de São Paulo) brought this week an extensive piece on recent acquisitions of Brazilian companies. Here are the highlights.

Gerdau and Marfrig, latest moves

Last week, steelmaker Gerdau bought remaining shares of Ameristeel for $ 1.6 billion. Fifteen days ago Marfrig led to Keystone for $ 1.26 billion. These two moves are the latest resumption of the internationalization of Brazilian companies.

In 2010

Brazilian entrepreneurs acquired more overseas competitors then foreigners in the country early this year. From January to May, the Brazilian companies have invested $ 11.16 billion in acquisitions or increase their participation in its subsidiaries. The figure topped $ 10.68 billion that foreigners have brought to the country for acquisitions. The United States became the main target and absorbed 40% of investments (excluding tax havens).

Historic perspective

The only time the Brazilians bought more foreign companies that now was in 2006 when the Vale acquired Canada’s Inco for U.S. $ 18 billion. The magnitude of the transaction distorts the data, which makes the current unprecedented upset. In 2004, the Brazilians have invested $ 6.64 billion in acquisitions abroad.

With the exception of 2006, the record was in 2008, with $ 13.9 billion – slightly higher than that obtained in five months this year. Acquisitions abroad demonstrate the robustness of Brazilian companies in the post-crisis, but are more a factor of pressure on the country’s external accounts, which should end the year with a deficit of around 2.5% of Gross Domestic Product (GDP).
Petrochemical industry

In February, the petrochemical company Braskem bought the division of the American polypropylene Sunoco for $ 350 million. “We entered the crisis with cash on hand. What is crisis for some is opportunity for others,” says the vice president for institutional relations and sustainable development of Braskem, Marcelo Lira.

Braskem’s goals of internationalization are to gain scale and access to raw materials. That is why the company expects to invest $ 2.5 billion in a petrochemical hub in Mexico until 2015. Braskem already holds the contract for the supply of naphtha with Pemex. “The acquisitions will continue, because the plans are to move from eighth to fifth in the world petrochemical industry by 2020,” said Lira.

Votorantim now in 22 countries

The international crisis also presented an opportunity to Votorantim, which acquired 21.3% of Portuguese Cimpor in January following fierce fighting with competitors Camargo Correa and CSN. It was the last flight of a process of going abroad that began in 2001. With focus on cement and metals, the company operates in 22 countries.

Why is this happening

A set of motives driving the internationalization of Brazilian companies. According to the project manager for the internationalization of Dom Cabral Foundation, Leonardo Sherban Cretoiu, foreign companies have lost market value in the crisis.

Emerging consolidators

Another factor is the consolidation caused by the crisis, with the emergence of groups such as Itau-Unibanco, Brazil Foods (Sadia and Perdigao) that go abroad.

Hostile bid. To seize the good opportunities, Brazilian companies are more aggressive. The machine manufacturer Romi made a hostile bid for American Harding. The board of the American company resists, but executives are making a pilgrimage Romi conversations with shareholders. In the first attempt, had 38% compliance. Extended the deadline and have already achieved 48%. Romi’s president, Livaldo Aguiar dos Santos, says it needs 66% to complete the acquisition. “Our offer today is $ 10 per share, but we are willing to talk with the board of Harding.” Romi has 90% of its revenues in Brazil. With the Hardinge, would drop to 45%.
Piorneer in the 1980

The internationalization picked up steam this year, but began a long time. Gerdau was one of the pioneers in 1980 and now earns half of sales abroad. “We seek participation in key markets, expanding operations in the Americas, occupying space in Europe and Asia,” says the company’s CEO, André Gerdau Johannpeter. In 2008, the Gerdau acquired a slice of Mexican Corso controller and used the crisis to raise its stake in Spanish Sidenor.
Keeping the trend

Experts say 2009 was just a break in the trend of internationalization. Research of the Dom Cabral  Foundation with 41 companies indicated that only one has no plans to expand its operations overseas this year.

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About Hildete Vodopives

Hildete de Moraes Vodopives is founder of Brazil Global and of the Harvard Strategists Bureau. She is a member of the Brazilian Investment Analysts Association (APIMEC-Rio) where she served as Corporate Relations Director and later, on the board. Hildete advises companies doing business in Brazil. She lives between Paris and Rio and is a member of the Harvard Club of Paris and of the Mercosur Women’s Forum.
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