Canadian energy conglomerate ATCO has completed the acquisition of a 40% stake in Ultramar’s Neltume Ports for approximately CAD 450m (USD 342.61m) it announced in a 12 September press release.
Neltume operates a network of 16 Latin American port terminals and three stevedoring businesses in Argentina, Brazil, Chile and Uruguay, with most of the ports handling containers, copper, forestry products, consumer goods and agricultural products.
In 2017, Neltume generated USD 90m of EBITDA in 2017, according to a company presentation. This implies an acquisition multiple of roughly 9.5x EBITDA.
ATCO said that the company would finance the acquisition initially with cash-on-hand and funds from already committed credit facilities and that it expects to refinance “a portion” of this through a capital markets transaction at a later date.
The Toronto-based ATCO had roughly CAD 2.229bn available under its lines of credit and CAD 244m in cash as of 30 June, according to SEDAR filings.
ATCO was advised on the deal by Morgan Stanley (financial), Bennett Jones (legal) and Cariola (local legal). Advising Ultramar on the sales process was BNP Paribas (financial) and Vial & cia (local legal).
ATCO pursued the acquisition to diversify and complement its existing portfolio of businesses and geographies, according to a company presentation
Neltume’s compound annual growth rate for cargo services was 12% while for container services it was 7% between 2010 and 2017.
The company also identified rising copper demand as an important reason to make the acquisition as the metal is expected to grow by nearly 2% annually and Neltume’s Chilean operations are well placed to take advantage of the country’s important role in the global copper mining industry. Chile represents 28% of global copper production and owns the largest reserves in the world.
Neltume is a good fit because the terminals function under long-term contracts and have common clients with the mining industry, with whom ATCO operates through other subsidiary companies said ATCO’s CEO Nancy Southern on a conference call held on 12 September.
A portion of ATCO’s investment may be used for berth expansions, which enable terminals to accommodate larger ships, or additions of multipurpose berths that créate additional growth potential.
ATCO previously partnered with Chile’s Ultramar in 2016 through ATCO-Sabinco, which provides modular solutions, container offices and workforce mining camps in Chile.
ATCO’s most recent Latin American operation was the February 2018 purchase of the Electricidad del Golfo 35MW hydroelectric Project in Veracruz, Mexico. BNP Paribas also acted as sell-side advisor on that transaction.