Wednesday, November 26, 2008

Acesco vigilant for opportunistic buys in Peru, Mexico and the US; sale not ruled out, export director says

Acerias de Colombia (Acesco), the family-owned Colombia-based steel group, could take advantage of the global turmoil to make opportunistic buys, preferably in Peru, Mexico or the US, export director Rafael Rosso said. 
According to Rosso, Acesco has annual revenue of roughly USD 5bn and has some 500 employees. When asked if it would look towards an IPO in the future, he said it would remain a family-owned company in the short term, but it could seek an IPO on the Colombian bolsa within the next five years. 
“We have an acquisition department inside the company, which is always looking for opportunities, that shows Acesco´s acquisition interest. We have special interest in the Peruvian, Mexican and US markets,” he noted. 
Acesco has experience in M&A, having acquired several Costa Rica-based companies like Metalco, a galvanized steel products company. Two years ago it bought Ecuador-based Rooftec, which produces steel construction products. 
According to Rosso, Acesco has been approached several times with takeover and stake sale offers. “It has been difficult to accept an offer because there are three generations involved in the decision-making, but it is a matter of time. The global trend is inclined towards mergers, especially in the metals sector, I don't see how we can stay behind,” Rosso said. 
Before the financial crisis, Acesco and Brazil-based Votorantim announced it was planning to build a steel plant in Colombia with an investment of USD 1.5bn. When asked if the project would move forward, Rosso said that “there is no perfect time to invest in a steel plant, the perfect time is when companies decide to do it. This is the correct time for the benefit of our country and for South American metal companies,” Rosso added. 
A US industry analyst said he did not see the current M&A market as conducive to deals. Buyers with capital may be looking opportunistically for targets but sellers are not plentiful, he said. He questioned whether the company was looking at hostile deals and what kind of gunpowder it had if it were to set off on making buys in this market. Steel companies interested in acquiring could be making wish lists right now as far as targets, but as far as timing is concerned it could be a while before it was possible to conclude a major transaction, he said. He added that he expects to see the market bottom at some point in the first half of 2009, but cautioned that it could be some time before a buyer and seller would likely see eye-to-eye on value. 
When asked if Votorantim could present itself as a suitor for Acesco, Rosso declined comment, saying it has not happened yet. 
For upcoming deals, as well as for its past acquisitions, the company hires several law and accounting firms, which Rosso declined to name. He said it would hire international and local advisors for any future M&A transaction. 
A Votorantim spokesperson did not return calls for an interview. The Brazilian conglomerate reported in October losses on derivative investments, and after that sold CanaVialis and Alellyx to Monsanto. It is in talks to sell Banco Votorantim and cancelled its planned stake purchase in Aracruz. The Brazilian group concluded the 85% acquisition of Peru-based zinc and lead miner, Atacocha on 31 October. If the conglomerate completes the sale of Banco Votorantim, it will recover its cash position and could pursue new acquisitions, commented a Brazilian sector analyst. 
“The only potential target in Peru is Corporacion Aceros Arequipa,” said a Peruvian analyst, adding that the only other Peruvian steelmaker is Siderperu, owned by listed Brazilian conglomerate Gerdau (NYSE: GGB). “The entrance of Gerdau into the Peruvian market, and the international turmoil could push the company to seek new capital,” said the analyst. According to the analyst, Aceros Arequipa announced last year a USD 80m investment to expand its production from 550,000 tons to 900,000 tons, after refusing several approaches from big players like Arcelor-Mittal (NYSE: MT), Argentina-based Techint and Brazil's Gerdau. “However, that happened last year, and now, with the crisis, it could be different,” said the analyst. 
Established in 1966, Corporacion Aceros Arequipa produces corrugated iron, wire, profiles, and other steel products for the construction sector. The company registered approximately USD 500m in revenues last year. 


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