Domestic M&A Deal of the Year - Grupo Argos
January 17, 2018 | Aaron Weinman
The Colombian conglomerate executed a novel strategic acquisition that left it well-positioned to participate in one of Latin America’s deepest infrastructure pipelines
M&A Project & Infrastructure Finance Colombia
Colombia’s billion-dollar infrastructure program has drawn interest from sponsors and banks both international and domestic. And for one of the country’s biggest conglomerates, the project pipeline serves as an ideal growth opportunity.
Grupo Argos’ $672 million two-part acquisition of local construction firm Odinsa was the product of a novel structure, representing a rare takeover done through Colombia’s stock exchange.
The acquisition offered potential synergies for Grupo Argos, says Felipe Pérez from BTG Pactual Colombia’s investment banking team, which worked on the deal. That led Pérez’s team to approach Argos about a possible takeover of Odinsa.
For $400 million executed through two block trades and a tender offer, Grupo Argos acquired roughly 55% of Odinsa’s shares between April and September 2015. Then in December 2016, Argos picked up another 44% through Colombia’s first tender offer payable through stock.
By using its own equity, Argos minimized necessary cash disbursements, securing $226 million in preferred stock out of a $272 million transaction. This method limited impact on the company’s credit rating, making it LatinFinance’s Domestic M&A Deal of the Year.
Grupo Argos CFO Alejandro Piedrahíta says approximately 87% of Odinsa shareholders participated in the tender offer for Argos’ shares, while the rest opted to cash out. Now, with more than 99% of Odinsa in tow, Piedrahíta says Grupo Argos is in a flexible position to transform the construction firm’s portfolio.
“In the past, Odinsa was very diversified with minority stakes in most projects. The strategy is now roads and airports.” He says Odinsa will “consolidate our portfolio with fewer projects, but with majority control.”
For example, Odinsa now has a 65% stake in El Dorado international airport in Bogotá, after the construction firm picked up an additional 30% from airport operator OPAIN in November 2016.
Piedrahíta says Colombian infrastructure is in drastic need of development. And through fellow subsidiaries — Cementos Argos and Celsia — he believes the conglomerate is experienced enough to advance the country’s pipeline.
“In terms of construction, Odinsa is a big player, so this was an opportunity to be a relevant player and capture the synergies between our subsidiaries,” he adds. “It was a once in a lifetime opportunity.” LF