Bloomberg News

M&A ‘Specialist’ Mexichem Lines Up Cash Ahead of ‘Big’ Deal

June 02, 2011

(Updates with stock price in 10th paragraph.)

June 2 (Bloomberg) -- Mexichem SAB, the Latin American chemical producer which bought more than 15 companies since 2007, is lining up $750 million to expand in Europe, U.S. or India as part of plans to spend at least $3 billion on growth.

The company expects to sign an agreement in coming days for the so-called revolving credit facility to prepare itself for a “large potential acquisition,” Chief Executive Officer Rafael Davalos said yesterday in an interview at company headquarters.

Profit at the Tlalnepantla, Mexico-based company has about quadrupled in four years through a takeover spree that includes the $350 million purchase of Ineos Fluor from Ineos Group Holdings last March. The deal made it the largest producer of calcium fluoride, a refrigerant component. The company estimates it will spend about $3 billion in the next five years as it searches for deals in Asia, the U.S. and Europe, he said.

“We want to grow and we’re going to go wherever we need to go,” Davalos said, adding that the company could spend that cash earlier and require more capital if it was interested in a big deal in the meantime. “We grew to like acquisitions, we’ve become an acquisitions specialist,” he said.

Davalos, who took over as the head of Mexichem on Jan. 21, said that the company will finance organic expansion and smaller acquisitions through cash flow and it will not require any bond sales this year to finance its global growth.

Mexichem is expanding operations in Japan and South Korea as it sees growing demand for chemicals used in refrigerants, lubricants and propellants.

Trust Expansion

Investors trust the expansion strategy of this company, Rogelio Gallegos, who helps manage about $700 million at Actinver SA in Mexico City, said yesterday in a phone interview.

“Mexichem has proven to expand aggressively but with value,” he said. “We like this company and we have an important position on it,” he said, declining to give details.

At the time of the acquisition, Ineos Fluor employed 350 workers in operations in Europe, the U.S., Japan and China. It supplies chemicals and fluorinated feedstock for refrigerants, medical inhalants and coatings for cookware and aerospace.

The stock rose 23 centavos, or 0.5 percent, to 45.40 pesos as of 1:39 p.m. in Mexico City and has gained about 2.7 percent this year, compared with a 7.6 percent decline for Mexico’s benchmark IPC Index.

Davalos said he’s constantly being approached by companies all over the world willing to sell assets.

“Even a lunch in Argentina supposed to be for a simple commercial operation ends up becoming another acquisition opportunity,” he said.

For now, Davalos said, a major acquisition deal may be closer in Europe or U.S. than in India.

--Editors: Dale Crofts, Laura Price

To contact the reporter on this story: Carlos M. Rodriguez in Mexico City at carlosmr@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.


Ebola Rising
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus