UOL Grabs $100M in LatAm Internet Deal

Given the spate of private equity deals targeting the Latin American Internet market, Universo Online (UOL) knew it had to enter the market with significant strength.

So, in a Sept. 14 first round financing, the Sao Paulo, Brazil-based Internet service provider and portal raised $100 million from a Morgan Stanley Dean Witter-led syndicate of private equity investors.

The investors were broken into two tiers with Morgan Stanley Dean Witter Private Equity, Blackstone Capital Partners III LP and Providence Equity Partners occupying the first tier. The second tier consisted of Credit Suisse First Boston Garantia Private Equity Funds, DB Capital Partners Latin America, Hambrecht & Quist, Latinvest Asset Management and Reuters Group Plc. Based on an $800 million valuation, the company raised more money than Nasdaq-listed StarMedia Network gathered in its three rounds of private financing, said UOL Chief Financial Officer Elemer Andre Suranyi.

The investor group took an aggregate ownership stake of 12.5% following the transaction, which was placed by Lazard Freres & Co. of New York. Suranyi said the placement exceeds the total private equity raised throughout the entire venture cycles of publicly held Internet brands such as Yahoo!, $70 million, StarMedia, $96.1 million and @Home, $92.7 million.

Founded by Folha Group and Abril Group, respectively Brazil’s leading newspaper and magazine publishers, UOL has established a strong market presence in that country. For the quarter ended June 30, UOL claimed 1.3 billion page views and nearly 500,000 subscribers from 106 cities.

“In addition, they have more than 70% market share in the chat market, which is practically an obsession in Brazil,” said a source close to the deal.

The company intends to use proceeds from the offering to expand into the Spanish speaking countries of Latin America, particularly Chile, Argentina, Venezuela, Colombia and Mexico, Suranyi said. This expansion will be accomplished via two avenues, acquisition of existing properties where appropriate and entry via a portal targeting particular areas should an acquisition not offer the right advantages.

Chairman Luis Frias said the company provides local and regional oriented content over its service and intends to use that content to establish itself in Spanish areas.