(Corrects paragraph 9 to change value of BRF-Lactalis deal to about $720 million from $233 million)
By Guillermo Parra-Bernal
SAO PAULO, Oct 2 (Reuters) - Mergers and acquisitions in Brazil gained momentum in the third quarter despite rising economic and political risks, as foreign companies and private-equity firms scoured for takeover targets, hoping to tap the country’s long-term potential.
Companies announced $23.26 billion worth of deals in Brazil between July 1 and Sept. 30, up 76 percent from $13.23 billion in the prior quarter, according to a preliminary Thomson Reuters report on M&A activity. About 136 deals were announced during the third quarter, up from 120 in the prior three months, a gain of 13 percent.
The surge in announcements came as tension heightened ahead of Brazil’s most unpredictable presidential election in 12 years. Brazilians will cast first-round ballots on Sunday.
Speculation last month that President Dilma Rousseff could lose to a more business-friendly candidate triggered a market rally, but that began to fizzle when she overtook rivals in recent polls.
Strategic buyers brushed aside caution and raised their exposure to Brazil by acquiring specific assets or tapping an economy with a vast consumer base. Buyout firms such as GP Investments Ltd and sovereign wealth funds like Singapore’s GIC were on the prowl, snapping up targets in sectors such as tourism and education.
“All players, locals or foreigners, strategic or financial, know that Brazil makes a lot of sense for their business plans,” said Fernando Iunes, global managing director for investment banking at Itaú BBA.
Growing activity in deals of greater complexity like spinoffs, de-listings and debt restructurings put Credit Suisse Group AG and Itaú BBA atop the rankings in terms of value and number of deals, respectively. Bankers expect more announcements to come after the election.
Still, deal flow fell on a year-to-date basis as the impact of a recession, dwindling business confidence and political uncertainty delayed some deals. The number of transactions fell to 375 from 452 a year earlier, although total deal value rose 46 percent to $50.24 billion, the report showed.
Rothschild ranked first in deal volume in the first nine months, working on 13 deals worth $23.26 billion. That included Telefonica SA’s $9.83 billion takeover of GVT SA, a fixed-line and Internet broadband carrier, and Groupe Lactalis SA’s $720 million purchase of BRF SA’s dairy assets.
Itaú BBA will get credit for its role as an adviser on the Telefonica-GVT deal, Brazil’s biggest M&A transaction this year, later in October.
Four years of economic stagnation and a slumping local currency have driven asset prices lower, boosting the appeal of targets and helping bids and offers to converge.
“The successful completion of deals that we recently saw indicates that the price gap will narrow further,” said Luiz Muniz, Rothschild’s head of Latin America investment banking.
For table on Thomson Reuters' M&A rankings for Brazil in terms of deal value and number of deals for this year, Editing by Todd Benson and Jeffrey Benkoe