At a time when exits in North America are scarce, Baring Latin America Partners has managed three exits in a region that’s often off investors’ radar screens.
Varel Freeman, managing partner of Baring Latin America Partners, declined to disclose IRRs or transaction prices for his firm’s latest deals, Absormex, Injepet Embalagens and Mobitel. “Our limited partners are happy with the terms on these deals. Each of these investments was of a modest size, all under $15 million,” he said.
He went on to say that the portfolio sales reflect the strong continuing interest that strategic buyers have in Latin America, making the exit market there better than the buying market.
“Brazil and Mexico possess large economies with significant local markets, healthy consumer demand and internationally competitive companies,” Freeman said. “Foreign investment flows and interest in well-managed companies within these countries remains strong.”
One of the three recent Baring exits was of Absormex in Mexico. The Baring Mexico Private Equity Fund sold its investment in the Monterrey-based company to an undisclosed Mexican buyer. Absormex is Mexico’s third largest independent producer of diapers and sanitary products with production facilities in Monterrey, Guadalajara and Altamira, Tamaulipas.
Freeman said it was time to sell as the company “has had a good spurt of growth. It’s financially quite stable. It’s an attractive time to be moving on and redeploying assets.”
Under Baring’s ownership, Absormex expanded, diversified (to include North and South America) and introduced new technology, as with its new environmentally friendly degradable diaper. It also upgraded its existing diapers.
“Demographic play is what attracted Baring to the company originally. Mexico has a young population, rising disposable income and in this case, being a lower cost producer that could sell at attractive prices meant we were pitching into a stronger part of the market than the high-end brand names,” said Freeman.
Baring acquired the Brazilian companies it recently exited, Injepet Embalagens and Mobitel, from the South America Private Equity Growth Fund. (The Overseas Private Investment Corp. (OPIC) turned over its South America Private Equity Growth Fund LP (SAPEG) to Baring to manage last November. Westsphere Group formerly managed the fund.)
Baring made its initial investment in Injepet, a packaging company, in 1997. Freeman said the exit was easy because packaging materials is an area that’s going to grow rather rapidly.
The company sold to Amcor Limited, a Melbourne, Australia-based global packaging company.
“This is a company that has grown rather dramatically,” said Freeman. “The relationship with Amcor brought in technology, marketplace and new opportunities for Injepet.”
Baring also decided to exit 10% of its investment in Mobitel, one of Brazil’s largest operators of call centers, to Portugal Telecom. The sale was made as part of a transaction in which Portugal Telecom agreed to make further investments in the company. Mobitel was SAPEG’s first investment, and it was made in 1996.
“Mobitel started out as a paging company, but as the paging business started to collapse, it became an operator of call centers; and is now one of the largest call center operators in Brazil,” said Freeman. So why sell a piece of it now?
“The price was attractive. It was an opportunity to take a little cash off the table and return it to the limited partners,” he said.