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GP Investments agrees two major deals in Latin America
13/08/2007. Source: AltAssets. 
 Brazilian private equity firm GP Investments has agreed to acquire 100 per cent of the Latin American Land Drilling and E&P Services businesses from Pride International for US$1bn in cash. In a separate transaction, GP agreed to buy a controlling stake in refractory material producer Magnesita, also based in Latin America, for R$1.24bn (approximately US$640m). This transaction sees GP gain 70.7 per cent of the voting capital and 38.6 per cent of Magnesita's total capital.
Of the total investment in the Latin American Land Drilling and E&P Services businesses, 60 per cent will be financed through new debt taken on by a special purpose vehicle that will consummate the transaction. Out of the total equity investment of US$400m, GP Capital Partners IV will contribute up to US$150m. GP Investments will contribute up to US$100m, which may be syndicated with co-investors, and US$150m will be contributed by co-investors that have already formally committed to participate in this investment, according to a statement.
The Latin America Land Drilling business comprises 73 land drilling rigs, 135 workover rigs and two lake drilling barges. The E&P Services business provides services to complete, maintain and enhance production from oil and gas wells, including pressure pumping, integrated, directional drilling and other well services. Combined 2006 Latin America Land and E&P Services segment revenues totalled US$824m, GP Investments said.
GP's acquisition of Magnesita sees 55 per cent of the investment, or R$680m, to be contributed in equity capital to RPAR Holding, the acquisition vehicle. A portion of the equity will be provided by GP's third and fourth funds, which will contribute R$98m and R$386m respectively. Co-investors who have already committed to participate in the investment will contribute R$143m, and GP will invest another R$53m, which may be syndicated among other investors. The remaining 45 per cent of the transaction, or R$560m, will be financed by RPAR through debt.
Magnesita supplies its products and related services to the steelmaking, cement and glass industries, from six plants in Brazil and one in Argentina. The company owns and explores magnesite reserves in Bahia, Ceará and Minas Gerais. In 2006 Magnesita reported net revenues of R$1.1bn and EBITDA of R$229m, according to a statement.
Magnesita shareholders will receive R$77 per common share and R$34 per preferred share. Once the acquisition is concluded, a tender offer for the acquisition of the common shares held by minority shareholders will be filed with Comissão de Valores Mobiliários as per article 254-A of the Brazilian Corporate Law, at the price of R$61.60 per common share.
Since its inception in 1993, GP and its predecessors have raised approximately $2.5bn from Brazilian and international investors. GP concluded its IPO in May 2006.
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