Three of the largest M&A transactions in Latin America in 3Q19 were tied to the energy sector, indicating the continued interest in the industry despite general deal activity in the region slowing in 2019.

M&A research firm Transaction Track Record (TTR) recorded 522 M&A, private equity, venture capital and asset acquisition transactions in Latin America between July and September this year, or 7.4% fewer than in the same period of 2018.

Reported deal value, however, came in at US$22.0bn during the quarter, a healthy 32.3% improvement over 3Q18. 

M&A activity in the region has taken a hit from the global economic slowdown and heavy uncertainty amid the US-China trade war and other geopolitical concerns, including Brexit, instability in the Middle East, and closer to home, the economic crisis in Argentina and concerns surrounding the ongoing political and economic turmoil in Venezuela.

Marcela Chacón, TTR research and business intelligence analyst for Latin America, confirmed in recent comments to BNamericas that the energy sector is helping to keep activity moving this year. 

“Energy and renewable energy have supported the significant dynamism of M&A activity in Latin America throughout 2019,” Chacón told BNamericas. 

TOP ENERGY DEALS

TTR further reported that three of the top five deals in the quarter were focused on electric power and oil and gas.

The largest, according to TTR, involves Sempra Energy’s agreement to sell Peruvian power distribution unit Luz del Sur to China’s Yangtze Power International of Hong Kong for US$3.59bn. 

With the deal expected to close in 1Q20, Yangtze Power International is reportedly in talks with four banks to take out a bridge loan of US$4bn to finance the acquisition.  

Valued at US$984mn, the third largest deal taking place in the quarter was Brazilian energy company CPFL Energia's acquisition of the shares in CPFL Energias Renovaveis held by a local unit of State Grid Corporation of China.

According to CPFL's website, State Grid's stake corresponds to 46.76% of the renewables subsidiary's capital stock, and this transaction represents the first step for a possible restructuring involving CPFL Energia and its units.

In the fifth biggest deal during the quarter: Brazil’s Petrobras agreed to sell its Liquigás LPG distribution unit to a consortium comprised of holding firm Itaúsa, Copagaz and Nacional Gás for US$857mn.

The deal is seen as part of Petrobras’ broader efforts to sell off the unit and several onshore fields in Bahia state towards an eventual divestment of US$26.9bn in assets over the next five years, this move coming after winning a key supreme court case in June.

The moves are part of the state-owned O&G firm’s efforts to pay down debt and exit areas outside the company's core focus of offshore deepwater oil and natural gas exploration and production.  

A LACKLUSTER YEAR

Year-to-date information for 2019, however, suggests this year will ultimately be lackluster. TTR reported 1,629 transactions between January and September, 666 of which reported deal values amounting to US$71.3bn. 

These translate to a 3.1% year-on-year increase in the reported deal value, but a 2.2% drop in the number of transactions.

Q3 private equity deals and venture capital injections, meanwhile, appeared to be moving in opposite directions, according to TTR.

The firm saw a 27.8% year-on-year drop in total capital raised via equity deals in the quarter to US$6.03bn, while venture capital deals ballooned 78.3% to US$3.3bn.

Source: Business News Americas / BN Americas - Chile