Since the drop in crude oil prices, Colombia’s government and local companies have worked to diversify revenue streams. For conglomerate Grupo Argos, that has meant focusing on its three core business areas – cement, power and infrastructure.
The holding company aims to streamline its businesses so they complement each other, chief financial officer Alejandro Piedrahita says.
Argos solidified the strategy in September when it bought a 54.75% stake in engineering firm Odinsa, completing the purchase through three transactions over the course of 2015.
In April, it bought 24.8% of Odinsa for 462 billion Colombian pesos ($159 million). Just two months later it followed up with a 465 billion peso deal, netting another 25%. The September transaction was small, about $30 million, but enough for Argos to gain control of Odinsa. Argos funded the purchase with cash and bank loans, it said.
“We saw an opportunity to consolidate our expertise in infrastructure not only in Colombia but also other regions in the Americas,” Piedrahita says.
Colombia’s infrastructure pipeline is growing and for Argos, the Odinsa acquisition was a way to increase its participation in this sector. Piedrahita says the company wants to be more active in the concessions business, to create a stable cash flow.
“As a holding company, it’s important to allocate capital efficiently and we decided to reallocate this capital into Odinsa,” he says. “This enables us to participate in businesses that add value to our shareholders.”
Odinsa for example, is part of the La Pintada consortium, which won the contract to build and operate the Pacífico 2 toll road concession. Piedrahita says the company’s various operations will provide an opportunity to remain active in the country’s infrastructure pipeline.
“Cement is obviously relevant in infrastructure,” Piedrahita says. “Cementos Argos is a key player in the 4G program and we will bring good project knowledge and designs on how to create value to the program.”
Diversification bid
Argos first showed its ambitions to expand outside Colombia in mid-2014, when its subsidiary Celsia bought power generating assets in Panama and Costa Rica.
Now with a foothold in the power sector, Argos is looking to diversify into renewable power generation. “We are looking at opportunities to have partnerships with key players and diversify into other countries in the region,” Piedrahita says.
Colombia, Central America, Mexico and the United States are the focal points, Piedrahita says. LF
WINNER: Grupo Argos