Vale megadeal puts Morgan Stanley, Bradesco at the top of Brazil M&A

Banco Bradesco

04/04/2017 07:00

By Guillermo Parra-Bernal and Tatiana Bautzer 
    SAO PAULO, April 4 (Reuters) - Morgan Stanley  MS.N  and 
Banco Bradesco BBI SA topped Brazil's mergers and acquisitions 
rankings in the first quarter, buoyed by advisory roles in the 
$21 billion corporate reorganization of Vale SA  VALE5.SA , the 
world's No.1 iron ore producer. 
    New York-based Morgan Stanley and Bradesco BBI, the 
investment-banking arm of Brazil's No. 3 listed lender Banco 
Bradesco SA  BBDC4.SA , surpassed rivals in last quarter's 
rankings by almost 10 times in terms of announced M&A volumes, 
Thomson Reuters deals intelligence data showed on Tuesday. 
    Both banks advised two of Vale's main shareholders on the 
deal. Under the terms of the reorganization, Vale will become a 
company with no defined controlling shareholder within three 
years, a landmark step to help stifle state interference in the 
company. urn:newsml:reuters.com:*:nL1N1G508L 
    The deal represents a milestone in a country long hobbled by 
corporate governance scandals and reorganizations that hurt 
minority investors. It comes as Brazil's government is selling 
dozens of power and sanitation utilities, as well as assets of 
state-controlled oil company Petróleo Brasileiro SA  PETR4.SA . 
    Companies announced $27.121 billion worth of Brazil-related 
mergers from January to March, up six-fold from a year earlier, 
the data showed. Excluding Vale, the value of M&A deals reached 
$6.195 billion, less than half the amount seen in the same 
period four years ago, before the recession struck.  
    The number of deals in the first quarter fell 35 percent to 
108 from a year earlier, the data showed. 
    Stricter legal and regulatory scrutiny has continued to put 
the brakes on M&A announcements this year, compounding the 
impact of the recession and political turmoil that has kept 
keeping buyers and sellers at odds over valuations. urn:newsml:reuters.com:*:nL1N1EW0NE 
    According to Alessandro Zema and Eduardo Miras, co-heads of 
Brazil investment banking for Morgan Stanley, M&A deals should 
accelerate this year, even if increased debt and equity capital 
markets activity posed some competition for the segment. 
    Declining borrowing costs and a stable currency could spur 
Brazil's recovery and the pace of takeovers through year-end, 
they said. More consolidation efforts could take place, as 
companies try to cut debt, improve their capital and tax 
structures, and become more efficient. 
    "It's very hard for a strategic player or a financial 
sponsor to ignore Brazil because of the cycle," Zema said. "The 
country's economy offers relevant opportunities for global 
players in almost every segment of activity." 
    According to Alessandro Farkuh, Bradesco BBI's head of M&A, 
more strategic players will seek to enter Brazil as President 
Michel Temer's administration passes pension, labor market and 
tax reforms aimed at restoring confidence in the economy. 
    "Activity will grow in a more robust manner once the 
macroeconomic uncertainties dissipate and players feel the 
outlook has turned much more predictable," Farkuh said. 
    A challenge for buyers and sellers alike remains a 
lengthening M&A execution cycle. Still, growing interest from 
multinational companies and buyout firms in potential targets 
"is leading to a more adequate pricing of assets," Bradesco 
BBI's Farkuh said. 
    Even as the list of delayed deals kept growing last quarter, 
advisory work remains intense, forcing banks to shuffle staff 
from areas with lighter workloads to handle more M&A and debt 
restructuring transactions. 
    Morgan Stanley topped value rankings after working on four 
transactions worth $21.663 billion, followed by Bradesco BBI's 
seven deals valued at $21.424 billion. Morgan Stanley last 
topped Brazil's first-quarter M&A league tables in 2000. 
    Itaú Unibanco Holding SA's  ITUB4.SA  investment bank led 
the number of deal rankings after working on 10 transactions. 
     
    Following is a table with Brazil M&A ranking for the first 
quarter. Numbers are expressed in U.S. dollars, unless 
specified.   
 RANKING  FINANCIAL ADVISORY    VALUE OF     NUMBER   RANKING 
 FIRST-Q         FIRM         DEALS (Jan.   OF DEALS  FIRST-Q 
 UARTER                       1-March 31)    (Jan.    UARTER 
  2017                                      1-March    2016 
                                              31)      
    1      Morgan Stanley &   $21.663 bln      4        14 
                  Co                                   
    2     Banco Bradesco BBI  $21.424 bln      7         6 
                  SA                                   
    3     Banco BTG Pactual    $1.875 bln      4         1 
                  SA                                   
    4       Citigroup Inc      $1.656 bln      1       n.a. 
    5       Goldman Sachs      $1.656 bln      2       n.a. 
              Group Inc                                
    6        Itaú BBA SA       $919.4 mln      10        2 
    7       Credit Suisse      $706.4 mln      1        14 
               Group AG                                
    8      JPMorgan Chase &    $608.4 mln      2        14 
                  Co                                   
    9      Bank of America     $517.9 mln      2         4 
            Merrill Lynch                              
   10     PriceWaterhouseCoo   $296.4 mln      2        14 
                 pers                                  
                                                          
            SUBTOTAL WITH     $26.123 bln      39        - 
          FINANCIAL ADVISER                            
            INDUSTRY TOTAL    $27.121 bln     108        - 
  
 (Editing by Lisa Shumaker) 
 ((guillermo.parra@tr.com; Tel: +55-11-5644-7714; Mob: 
+55-119-8346-7153; Reuters Messaging: 
guillermo.parra.thomsonreuters.com@reuters.net)) 
 
Keywords: BRAZIL M&A/OUTLOOK