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Darling Ingredients buys Brazilian Gelnex for $1.2bn

Two giants are little known by consumers, even though most have possibly already consumed some of their products used as inputs for the food, pharmaceutical and cosmetic industries

10/19/2022

Texas-based Darling Ingredients agreed to buy the Brazilian company Gelnex for $1.2 billion in cash. This is the biggest deal in Brazil’s consumer sector this year, stitched together by Santander on the selling end and Morgan Stanley on the buying end.

The two giants are little known by consumers, even though most have possibly already consumed some of their products used as inputs for the food, pharmaceutical and cosmetic industries.

Gelnex is one of the world’s largest manufacturers of gelatin and collagen peptides, with four plants in Brazil, one in Paraguay and another in the United States. It exports ingredients used in supplements, cereal bars, dairy beverage, candies, pills, and beauty products to over 60 countries. The company founded in Itá, Santa Catarina, has the capacity to make nearly 50,000 tonnes a year of collagen.

In the competitive process, Darling beat the proposals of international private equity funds and protein giants – Brazilians JBS and Marfrig studied the business, according to Pipeline, Valor’s business website. The relevance of Gelnex’s raw material, which are pork and beef by-products, justifies the interest of the protein companies, which saw high synergy in the operation.

JBS started betting on the segment this year. In August, the meatpacker unveiled an investment of R$400 million in its newly created Genu-In, with ambitions to compete in the market with Rousselot, Darling’s brand, and Germany’s Gelita. Marfrig does not make use of pig skin and bovine leather by-products, it only sells them, which led it to consider a transaction.

The deal has also drawn international funds due to its size since it is not so common in Brazil’s M&A environment checks over a billion dollars. Gelnex was until now controlled by three holding companies – Gel Holdings, Ibo Participações, and Itá Investors – represented by a group of directors but owned by a local businessman.

Darling also operates in other segments, transforming edible by-products and food waste into sustainable products and renewable power. It is a behemoth with 250 plants in 17 countries that reuses almost 15% of the world’s meat industry waste into products such as green energy, renewable diesel, collagen, fertilizers, and feed. Rousselot alone has 11 plants.

The company’s origin can be traced back to a family business in Chicago, but its current headquarters are in Irving, Texas. This is Darling’s second acquisition in Brazil this year alone. South America’s largest country is considered a strategic market by CEO and chairman Randall C. Stuewe. In May, the company unveiled the purchase of the Fasa group for $542.6 million in cash.

“Brazil will play a big role in feeding a growing world population, which makes it a premier location to grow our specialty ingredients business,” he said earlier this year. This time, Mr. Stuewe reinforced the bet on the specific demand for collagen. “Driven by strong growth in demand for collagen products in the global health and nutrition market, we anticipate the collagen peptides market to double in the next five years,” he said in a statement.

With shares traded in the U.S., Darling is valued at $12 billion. The proclaimed sustainability in the company’s business has been reflected in the market: the stock jumped 340% in five years. The size of the acquisition put pressure on the stock on Tuesday, and the company fell by 4%. Even so, they are up 6% this year, compared with S&P500’s 23% drop and Dow Jones’s 17% decline.

Gelnex communicated the operation to employees on Tuesday, Pipeline has learned. The company did not return requests for comment

The deal is expected to be closed early next year, after regulatory approvals

*By Maria Luíza Filgueiras — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Copel buys EDP’s wind farms for R$1.8bn

With acquisition, Paraná’s state-owned company has a total generating capacity of 6.7 GW

10/07/2022

Daniel Slaviero — Foto: Divulgação

Daniel Slaviero — Foto: Divulgação

State-run Copel (Companhia Paranaense de Energia) has acquired the wind farms Aventura and Santa Rosa & Mundo Novo from EDP Renováveis for R$1.8 billion. In all, there are nine wind farms in operation in the municipalities of Touros and São Tomé, in Rio Grande do Norte, totaling 260.4 megawatts of installed capacity.

Of the total, the amount of R$965 million is expected to be paid via equity, and the remainder can be paid through funding or with its own money. The project has long-term financing with maturities up to 2043 contracted with Banco do Nordeste (BNB) with rates of IPCA (Brazil’s benchmark inflation index) + 2.19% per year (Aventura) and IPCA + 1.98% per year (Santa Rosa & Mundo Novo).

Most of the power generated (76.5%) was sold in auctions in the regulated environment, and 13.7% of the power generated is sold in the free market. There is still 9.8% left for new contracts.

With the acquisition, the state-owned company of Paraná has a total generating capacity of 6.7 GW, including hydro, thermal, wind, and solar. The company’s goal is to have a more diversified portfolio, reducing exposure to hydrological risk. The operation will be carried out by Copel GeT, a wholly-owned subsidiary of the company.

CEO Daniel Slaviero highlighted the strategic location of the farms and the importance of acquiring an operational asset for the business. According to him, the company consolidates its presence in Rio Grande do Norte and increases its wind generation capacity by 28%, thus reaching 1.2GW of wind generation in its portfolio.

“The acquisition achieves a major strategic goal, which is to recompose the EBITDA with the sale of Copel Telecom to focus on the power business. The largest investment plan is focused on Copel Distribuição, but the company has the muscles to make those acquisitions in power generation” and “brings what matters most, which is a double-digit return,” he said.

Cássio Santana da Silva, the company’s chief business development officer, said that with the EBITDA plan the company reaches a turning point and will start to analyze closely greenfield assets, which “despite having more risks, bring higher returns.”

In the view of Marcelo Sá, a utility analyst at Itaú BBA, the management team has done an important job by improving efficiency, selling non-strategic assets, implementing governance improvements, and acquiring the Vilas wind farm in 2021.

“The company now has a clear dividend policy, in addition to control mechanisms such as investment committees, which reduce the risk of capital allocation. The growth strategy focused on M&A is the most appropriate, with much lower execution risk, since the current moment is challenging for the development of new renewable projects, given the increase in Capex costs and the drop in power prices,” he said.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Analysis: XP’s acquisition of Modal can be a masterstroke

Em troca de ações, XP compra 100% do Banco Modal por R$ 3 bilhões

The acquisition of Banco Modal by XP Inc. brings to the financial group founded by Guilherme Benchimol R$30.4 billion in assets under custody, 501,400 active clients and a portfolio line of credit of R$606.8 million, data from the third-quarter results show. It may seem little for XP, which was already near R$800 billion under its umbrella, with 3.3 million active clients and R$8.6 billion in collateralized credit operations. But far from being a negligible step in the consolidation of the investment market in Brazil, XP’s bid can be considered a masterstroke.

With the countless agreements closed by Modal, such as the sale of up to 35% of its capital to Credit Suisse in mid-2020, the digital bank was one competitor with the potential to cause problems to XP. In the premium segment, which serves customers with at least R$300,000 in assets, Modal had been offering asset allocation with the Credit Suisse brand. Modal’s mobile application made available 28 exclusive funds from the Swiss group’s private banking in Brazil and the plan was to reach 40 in the first quarter of 2022.

In a meeting with investors in mid-December, Modal CEO Cristiano Ayres said that more than just a pretty name, the presence of Credit Suisse was the way to offer financial advice similar to what is done with large fortunes. The relationship with the Swiss group also paved the way for Modal to take part in the syndicate of banks in capital market operations and distribute assets originated by the firm to its retail base.

The foreign partner’s seal of approval also helps draw independent and professional brokerage firms to the platform, Mr. Ayres said. Modal had been moving forward in this distribution channel since the acquisition of the research company Eleven, which already had relationships with several asset management firms, including competitors.

Another front in which Modal had been investing was in the so-called “B2B2C,” in which it offered financial services to various partners. It already had agreements with companies such as Rappi, Dotz and Conta Black.

Acquisitions made by Modal to create an “ecosystem of financial well-being” are also in line with the businesses where XP demarcated its territory, including financial education and training of professionals, whether in investments or technology.

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