São Paulo-based Demarest Advogados has kept busy during August as an advisor to foreign companies acquiring Brazilian assets.
In a deal closing August 18, M&A partner Lucas Tavares led Demarest in advising a subsidiary of Philadelphia-based Hill International in acquiring 21.334% of the capital stock of Rio de Janeiro-based Engineering S.A. Serviços Técnicos and 18.32% of the capital stock of Engineering S.A. Serviços Técnicos SP, held by Francisco Nioac de Salles and Henrique de Aragão. The deal value is not public, but Hill International Brasil Participações comes away owning 95.7% of Engineering S.A. Serviços Técnicos’s capital stock and 87.78% of Engineering S.A. Serviços Técnicos SP’s capital stock.
In another cross-border transaction, global buildings material group CRH, based in Dublin, acquired assets worth $7.5 billion in 11 countries, including Brazil, from Swiss-based Lafarge and Holcim. Demarest got involved as advisor on the deal's Brazilian aspects through its relationship with Dublin-based law firm Arthur Cox, leading international counsel. This deal closed August 3, though the company does not expect to complete the Philippines aspects until the third quarter of 2015. The Brazilian assets are worth $230.4 million.
Partner Paulo Coelho da Rocha led Demarest on the CRH deal. Although Demarest has had past interactions with CRH, this is the first deal where it advised the company. “We had to make sure the company would own a standalone business ready to operate from day one, rather than just a package of assets. The deal has posed a significant number of challenging post-integration related issues,” M&A senior associate Gonçalo Godinho and Rocha told IFLR1000.
The deal comes at an opportune time for the construction sector in Brazil. An August 12 MarketWatch article cites a TechSci research report noting that the construction chemicals market in Brazil "is projected to surpass [$]1.3 billion by 2020.” On this point, Rocha and Godinho commented, “If proven … that’s good news for the sector and for CRH, but that was not the key driver for the deal. The divestment made by Lafarge and Holcim was caused by a sell-off required to get approval from antitrust authorities in Europe, Brazil, and elsewhere in relation to the merger of those two companies. For CRH, this was a terrific opportunity to set a footprint in several strategic jurisdictions and to consolidate its position as one of the world's largest building materials suppliers.”
The transaction added 15,000 employees to CRH, bringing its total number of employees to 91,000, and doubling its cement production. CRH is now the third-largest building materials player and second-largest aggregates player in the world.