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By Tatiana Bautzer and Guillermo Parra-Bernal
SAO PAULO Apr 19 Dubai Ports World Co and MSC
Mediterranean Shipping Co SA are seizing on Brazil's three-year
recession and rising debt among local port operators to bid for
terminals in one of the world's top commodity exporters.
However, their plan will not come cheap.
Half of the 12 terminal and ports sales negotiated in Brazil
since January 2016 were at prices above multiple averages,
Thomson Reuters data showed. People familiar with three of six
ongoing port deals in Brazil expected sellers to fetch 20
percent-plus premiums for their assets, based on regional
Local ports have gained extra allure in the wake of a
government drive to privatize infrastructure in Latin America's
largest economy, even if global maritime activity remains tepid.
Foreign players perceive Brazilian port operators as less prone
to facing roadblocks than other infrastructure segments, Eleven
Financial Research chief strategist Adeodato Volpi Netto said.
A record grain crop and a recovering economy should keep
ports busy, potentially accelerating M&A activity before
valuations climb further. Port deal vaulations in the Americas
averaged 8.9 times future earnings before interest, tax,
depreciation and amortization, data compiled by Thomson Reuters
"Timing seems right for these deals as interest from global
players in Brazil's port industry keeps growing," Volpi said.
Brazil has about 37 state-owned ports and 180 privately-held
MSC is offering partner TPI Triunfo Participacoes &
Investimentos SA the equivalent of 12 times expected
EBITDA for a 50 percent stake in PortoNave, a Santa
Catarina-based private port, and a nearby cold storage unit,
three of the people said. Triunfo needs the cash to honor
looming debt payments, the people said.
After abandoning talks to buy Advent International Corp's 50
percent stake in TCP Terminal de Conteineres de Paranagua SA due
to price issues, DPWorld is negotiating partner Odebrecht SA's
66 percent stake in Santos-based Embraport at similar multiples,
the people said. Odebrecht's involvement in a graft scandal in
Brazil has delayed conclusion of the deal, they said.
Even terminals perceived as a mature value play, like TCP,
have seen resilient valuations.
According to the people, China Merchants Group Ltd
would be willing to pay slightly more than 13 times
expected 2017 EBITDA for Advent's stake in TCP, despite the
port's limited expansion opportunities. The bid would value TCP
at 3.5 billion reais ($1.1 billion), two of the people
MSC did not return a message seeking comment. Advent,
Triunfo, Odebrecht, China Merchants, DPWorld and Odebrecht had
no immediate comment.
The people spoke under the condition of anonymity, citing
confidentiality accords surrounding the deals.
Potential takeover targets include liquid bulk terminal AGEO
Terminais e Armazens Gerais SA and Porto Itapoa, located in the
southern Santa Catarina state, three people said.
AGEO's owner, Cynara Ruiz, has hired the investment-banking
units of Banco Santander Brasil SA and Banco
Bradesco SA to handle a sale, two people said.
Itapoa's owners Battistella Administracao & Participacoes SA
and BRZ Investimentos SA-led funds may this week hire
a team of financial advisers to conduct a sale, one person said.
Brazil's D'Avila family is also considering putting Terminal
Portuario de Itajai SA, or Teporti, up for sale, one person
AGEO, Itapoa, Teporti and the banks did not immediately have
Brazil's port industry is undergoing deep changes, with
returns seen declining as shipping firms gain scale through M&A.
Denmark's Maersk Line, the world's No. 1 shipping
company, announced last December the purchase of smaller rival
Hamburg Sud, which may put pressure on rates, the people said.
Competition has especially increased in the Santos port,
Latin America's largest, hampering profits for container
players. New terminals began to operate in the Santos port in
2014, when the economy slumped into recession - leading to a
supply glut that only worsened as demand declined.
($1 = 3.1149 reais)
(Reporting by Tatiana Bautzer and Guillermo Parra-Bernal;
Editing by Andrew Hay)