Vale megadeal puts Morgan
Stanley, Bradesco at the top of Brazil M&A
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[April 04, 2017]
By Guillermo Parra-Bernal and Tatiana Bautzer
SAO
PAULO (Reuters) - Morgan Stanley 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, 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.
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.
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.
![](http://archives.lincolndailynews.com/2017/Apr/04/images/ads/current/lincolntheatre_sda_031016.png)
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.
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.
![](http://archives.lincolndailynews.com/2017/Apr/04/images/ads/current/graue_17_malibu_022717.png)
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![](http://archives.lincolndailynews.com/2017/Apr/04/images/ads/current/openarms_lda_EASTER_2017.png)
"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.
![](http://archives.lincolndailynews.com/2017/Apr/04/images/ads/current/farmers_grain_sda_daily_farm_2016.png)
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.
Itaś Unibanco Holding SA's 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
![](http://archives.lincolndailynews.com/2017/Apr/04/images/ads/current/Lincolnland_catering_sda_daily_SFARM_2017.png)
6 Itaś 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)
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