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M&A Deals |Turner and Esporte Interativo

Acquisition

Source: EXAME

São Paulo – The number of M&A transactions in the Brazilian market fell 4% in the second quarter relative to the same periodin 2012. Between April and June, 213 deals were sealed, according to a report by PricewaterhouseCoopers (PwC).

In the first quarter, 397 deals were announced, down 1.5% from the first quarter of 2012. The IT sector deals formed the largest bloc of transactions, with 54 deals done in the second quarter.  The services sector was close behind, with 47 deals, and 40 deals involved the retail sector.

The prospects of the 3rd quarter are most cautious, with a tendency to spend more time and analysis on transactions, possibly affecting the annual total. “We see opportunities for companies and investors that are able to take advantage of the moment to strengthen and consolidate” their businesses,” the  report said.

The magazine goes on to list the deals done.

An interesting deal I missed out on, closed June 10, 2013:

 Turner Broadcasting, the TV division of Time Warner, announced its acquisition of a minority share in the Brazilian channel Esporte Interativo (EI), which operates on the Internet as well as open to air TV broadcasting and cable TV. The deal went for R$ 80 million.

The companies did not reveal the size of the participation acquired. With this deal, Turner gains two seats on the board of directors of EI, which has 7 seats.  The Brazilian channel will continue to function as an independent company. Management decisions will remain with the original controlling group. “Pay TV is growing in Brazil and the country will host major sporting events in the next few years. This is a market we want to invest in,” said Alex González, VP Corporate Development and New Media, Latin America, to Valor.

This is the third investment of this type by Turner. In 2007, the company bought seven channels from the Claxson group of Argentina, for US$ 234 milhões. In 2010, it spent US$ 150 milhões to acquire Chilevisión. The current deal is its first direct investment in a sports channel anywhere in the world.  Turner owns transmission rights to various sports, but content is delivered on its ther channels.

The executive says the purchase of Esporte Interativo will help Turner learn more about the Brazilian market, and especially the open to air broadcasting business, where Turner had no presence until now. He says he believes that the other 13 channels that Turner owns in Brazil will results synergies  between content and publicity with the new channel.

Created in 2007, the Brazilian channel employs 350. Its audience is an estimated 33 million per month on TV and 10 milhões on the  internet.

Prior to the sale to Turner, EI was structured as follows:  A controlling bloc with 52% shared among 9 partners, a 25% bloc of other partners, a bloc of 15% owned by BNDESPar (which invested R$14 million in 2009) and 8% in the hands of the Corcovado Capital investment fund.

Diniz says none of the original partners left the company with the entry of the U.S. company. The deal results in the dilution of shares. [?]

The company has no IPO plans.