Too Tantalizing to Refuse

Sep 1, 2002

Argentina's financial crisis has yielded fine pickings for predatory companies. In July, Brazil's Petrobras snatched up the beleaguered Pérez Companc but the deal significantly raised its risk profile.

Argentina is going through hell, but there are a few opportunities around that are just too good to turn down. In July, Brazil's national oil company, Petrobras, could not resist an offer to buy Pérez Companc, then Argentina's largest independent oil producer. Pérez was one of Argentina's most admired companies, but January's 70% peso devaluation wrecked its finances. Its market capitalization plummeted to $1.09 billion in August from $3.68 billion at the end of last year. Its debt-to-equity ratio hit 199% in June, against 89% a year earlier. Francisco Gros, president of Petrobras, agreed to pay $1.13 billion for the company, making this the largest acquisition by far in Argentina this year. "We did this deal because it was a deal you cannot refuse," says Gros. "Generally this is not the time to go on an acquisition binge and instead look after cash, but we all thought...

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