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Mergers & Acquisitions                  Second Edition  Editors: Michael E. Hatchard & Scott V. Simpson          Published...
CONTENTSPreface          Michael E. Hatchard & Scott V. Simpson, Skadden, Arps, Slate, Meagher & Flom (UK) LLPArgentina   ...
Mexico        Juan Francisco Torres Landa Ruffo, Federico de Noriega Olea                          & Alejandra Parra López...
Barrera, Siqueiros y Torres Landa, S.C.                                                                MexicoSignificant De...
Barrera, Siqueiros y Torres Landa, S.C.                                                                Mexicodemands credi...
Barrera, Siqueiros y Torres Landa, S.C.                                                                               Mexi...
Barrera, Siqueiros y Torres Landa, S.C.                                                                Mexico     The Year...
Barrera, Siqueiros y Torres Landa, S.C.                                                                  Mexico           ...
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Global Legal Insights M&A


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Juan Francisco Torres Landa R., Federico de Noriega O. y Alejandra Parra L. contribuyeron con la publicación Global Legal Insights en la preparación de un artículo que describe la situación actual para las operaciones de fusiones y adquisiciones en el mercado mexicano.

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Global Legal Insights M&A

  1. 1. Mergers & Acquisitions Second Edition Editors: Michael E. Hatchard & Scott V. Simpson Published by Global Legal Group
  2. 2. CONTENTSPreface Michael E. Hatchard & Scott V. Simpson, Skadden, Arps, Slate, Meagher & Flom (UK) LLPArgentina Marcelo E. Bombau, M. & M. Bomchil 1Austria Sascha Hödl, Schoenherr Attorneys at Law 5Brazil Fabiano Gallo, Adriano Chaves & André Gilberto, Campos Mello Advogados 13Canada Simon A. Romano & Elizabeth Breen, Stikeman Elliott LLP 21Cayman Islands Ramesh Maharaj, Rob Jackson & Melissa Lim, Walkers 29Chile Pablo Guerrero V., Bernardo Simian S. & Franco Acchiardo O., Barros & Errázuriz Abogados 36China Adam Cheng & Yuling Geng, Skadden, Arps, Slate, Meagher & Flom LLP 42Colombia Jaime Robledo-Vásquez & Pablo Carrizosa-Ramírez, Gómez-Pinzón Zuleta Abogados 55Germany Dr Steffen Oppenländer & Dr Hans-Jörg Ziegenhain, Hengeler Mueller 63India Sumes Dewan & Yeshika Dublish, Desai & Diwanji 69Japan Yuto Matsumura & Hideaki Roy Umetsu, Mori Hamada & Matsumoto 75Korea Joon-Woo Lee, Sang-Hyun Ahn & Hwang Lim Jang, Yoon & Yang LLC 83Malaysia Hong Yun Chang & Wai Sum Teo, Tay & Partners 90Mexico Juan Francisco Torres Landa Ruffo, Federico de Noriega Olea & Alejandra Parra López, Barrera, Siqueiros y Torres Landa S.C. 100Netherlands Charles Honée & Katinka Middelkoop, Allen & Overy LLP 106Norway Ole Kristian Aabø-Evensen, Aabø-Evensen & Co Advokatfirma 114Poland Slawomir Uss & Aleksandra Kolyszko, Sołtysiński Kawecki & Szlęzak 125Russia Vladislav Zabrodin & Anastasia Fomicheva, Capital Legal Services, L.L.C. 133South Africa Christo Els & Jesse Watson, Webber Wentzel 139Spain Fernando Vives Ruiz, Garrigues 147Switzerland Martin Weber, Lorenzo Olgiati & Jean Jacques Ah Choon, Schellenberg Wittmer 152Turkey Dr Umut Kolcuoğlu, Kemal Aksel & Ceren Gülal Karakuş, Kolcuoğlu Demı̇ rkan Attorneys at Law 160United Kingdom Chris Pearson, Paul Whitelock & Christopher McCarthy, Norton Rose 167USA Ann Beth Stebbins & Alan C. Myers, Skadden, Arps, Slate, Meagher & Flom LLP 176Venezuela Carlos Eduardo Acedo Sucre & Luisa Acedo de Lepervanche, Mendoza, Palacios, Acedo, Borjas, Páez Pumar & Cía. 187Vietnam Hoang Nguyen Ha Quyen, Dr Nguyen Anh Tuan & Nguyen Xuan Thuy, LCT Lawyers 195
  3. 3. Mexico Juan Francisco Torres Landa Ruffo, Federico de Noriega Olea & Alejandra Parra López Barrera, Siqueiros y Torres Landa, S.C. IntroductionThis article provides: (a) a brief overview of the current status of the mergers & acquisitions marketin Mexico, including a list of significant deals announced or closed in 2012; (b) a description of themajor industries in which these transactions have materialised; (c) some notes regarding recent legaldevelopments that impact mergers & acquisitions; and (d) some suggestions of the authors abouthow to improve the current legal framework for mergers & acquisitions. This article is designed onpurpose as an executive summary of all those topics and not as a comprehensive study. The viewsstated herein are the personal opinions of the authors and do not represent the views of the firm inwhich they work or of any professional association they may belong to or participate in. Overview of the Mergers & Acquisitions MarketThere is limited public information available with respect to the M&A market in Mexico, mostlybecause most mergers and acquisitions are between private companies that are not reported to theMexican Stock Exchange (Bolsa Mexicana de Valores) and/or that do not involve a tender offer.However, the most significant mergers (i.e., mergers that meet certain thresholds related to the amountsinvolved in the transaction or the size of its participants in terms of revenues, capital stock or assets)must be notified to and cleared by the Mexican Federal Competition Commission (Comisión Federalde Competencia) (“CFC”). Hence, we obtained information on the recent M&A activity in Mexicobased on data included in the resolutions issued by the CFC authorising, conditioning or disapprovingmergers. This information is publicly available at the website of such governmental agency.1During the first ten months of 2012 there have been 65 applications filed with the CFC. This figure isvery low with respect to mergers and acquisitions in 2009 and 2010; the volume had a significantdecrease even comparing the number of applications filed in 2011. Through 2011 and in 2012 thegraphic below shows a downward trend. However, a significant factor that may have influenced thedecrease in the number of mergers & acquisitions during the last two years is the fact that the MexicanCompetition Law has seen amendments since May 2011, which relaxed the thresholds for having tosecure clearance from the CFC. Therefore, this downward trend does not necessarily mean that therewas less activity in the M&A market but simply that fewer mergers were reported to the CFC. Graph 1: M&A applications filed 100 90 80 70 60 50 2009 2010 2011 40 30 2012 20 10 0GLI - Mergers & Acquisitions Second Edition 100© Published and reproduced with kind permission by Global Legal Group Ltd, London
  4. 4. Barrera, Siqueiros y Torres Landa, S.C. MexicoSignificant Deals and HighlightsBased on the information available, the most significant mergers & acquisitions for the Mexicanmarket during 2012 are the following:(i) AB InBev consolidated its ownership of Grupo Modelo, the largest beer brewer in Mexico which,among other operations, manufactures and sells “Corona”, by buying out the 50% stake that theMexican shareholders still controlled, for a purchase price of a little over US$20bn. This transactionrepresented the largest transaction in value for a Mexican company, right after the acquisition ofBanamex by Citibank in 2001 for around US$12.5bn.(ii) American Tower Corporation, a company which operates the leasing of communication towersto companies such as Iusacell, Nextel and Telefónica, expanded its operations in Latin Americaand Mexico through the acquisition of 2,500 communication antennas of Telefónica México, C.V., a mobile-phone services operator in Mexico. The acquisition was valued at an amount ofUS$500m. American Tower Corporation has reached the amount of 1,778 communication antennasacquired from Telefónica in the last months for an amount of US$300m; this situation has resulted indoubling the size of the company’s operation in Mexico, reaching 5,467 antennas in operation overa total of 42,500 units in Mexico.(iii) Coca Cola Femsa, S.A. de C.V., the largest Coca-Cola bottler in Mexico with significantparticipation in other Latin American markets, acquired the beverage division of the company GrupoFomento Queretano, S.A. de C.V., in a transaction valued around US$480m. The transaction wasimplemented through the acquisition of shares in the Company and assumption of debt – as a resultof this transaction, Coca Cola FEMSA will also hold 12.92% of Promotora Industrial Azucarera, aparticipant in the Mexican sugar industry.(iv) Grupo Elektra, S.A. de C.V. entered the U.S. financial market by the acquisition of 100% of thecapital stock of the company Advance America Cash Advance Centers Inc., extending its operationsto Mexico, Argentina, Brazil, El Salvador, Guatemala, Honduras, Panama and Peru. Grupo Elektra isone of the leading financial services and specialised commerce companies in Latin America throughaffordable credit granted to mass markets. The acquisition was performed through a subsidiary ofGrupo Elektra in the United States, Eagle US Sub Inc.(v) Corporación Actinver S.A.B. de C.V. (a leader in investment services in Mexico) acquired theinvestment advisory business (also called proprietary bank) of American Express Bank (Mexico)S.A., through the transfer of financial assets worth US$863.9m, including checking and savingaccounts, deposit products and bank investment, as well as the distribution of investments fundsshares. American Express Bank will keep its credit card operations.(vi) Empresas ICA, Mexico’s largest construction company, acquired a 51% stake of the miningconstruction services in Peru, San Martin Contratistas Generales, S.A., for US$123m, to be paidin the following five years. The transaction is part of the international expansion strategy of thecompany, based on its strategy to participate with local groups to operate in Latin American countries.(vii) 14 months since it was announced, Grupo Televisa, S.A.B, de C.V. (the largest TV companyin Mexico) acquired 50% of the mobile services provider Iusacell, S.A., for US$1,600m. The CFCauthorised the transaction subject to the compliance with conditions to promote greater marketcompetition in open and restricted television. In early 2012, the CFC rejected the acquisition ofIusacell by Televisa, based on the argument that it would be detrimental for competition in the mediaindustry because Iusacell is controlled by TV Azteca, the second-largest TV company in Mexico.However, after the parties challenged the decision, the CFC considered that the participation ofTelevisa in Iusacell could achieve greater efficiencies and thus positively impact competition levelsin the mobile communications market.(viii) Grupo Financiero Scotiabank Inverlat S.A. de C.V. reached an agreement with GrupoFinanciero Banamex S.A. de C.V. to acquire the total assets of Crédito Familiar, S.A. de C.V.,a Multiple Purposes Financial Company (Sofom), one of the leading personal credit companiesin Mexico’s financial market. The acquisition of Crédito Familiar supports Scotiabank’s growthstrategy in Mexico, considering that it significantly increases the participation in a market thatGLI - Mergers & Acquisitions Second Edition 101© Published and reproduced with kind permission by Global Legal Group Ltd, London
  5. 5. Barrera, Siqueiros y Torres Landa, S.C. Mexicodemands credit products.(ix) The holding Grupo Radio Centro S.A.B. de C.V. acquired 100% of the assets of American radiostation KXOS-FM Emmis Communications Corporation through a transaction worth US$ 85.5msigned between the two organisations since April 2009. The acquisition will be financed through aUS$90m credit facility granted to GRC by a banks consortium.(x) In the strategy of opening operations in Latin America and specifically in Mexico, ACE Groupacquired ABA Seguros, S.A. de C.V., an insurance company, and Fianzas Monterrey, S.A., a bondingcompany. This acquisition will open the ACE Group operations in Mexico for the Property Insuranceand Commercial Liability, Accident, Health and Life. In order to pay US$17,200m debt with theTreasury Department of the United States, Ally Financial Inc., a GMAC General Motors AcceptanceCorporation, agreed to sell ABA Seguros S.A. de C.V. to the ACE Group in a transaction valuedaround US$865m. Fianzas Monterrey, the second biggest bonding company in Mexico and the thirdin Latin America, owned by New York Life, was acquired by the ACE Group for an amount aroundUS$285m; the transaction is expected to close on the first quarter of 2013 because of regulatoryapprovals and other closing conditions.(xi) Afore XXI Banorte, a Mexican Fund Retirement Administrator incorporated as a result of themerger between Afore XXI and Afore Banorte, acquired 100% of Afore Bancomer, S.A. de C.V., acompany of the Financial Group BBVA, for an amount of US$1,730m. Banorte will participate as aleader in this financial sector with 27.3% of the 48 million retirement accounts in Mexico.(xii) Crédito Real S.A.P.I. de C.V. S.O.F.O.M. (a Mexican financial company specialising inconsumer lending) was authorised by the National Banking and Securities Commission to makean initial public offering of shares in the Mexican Stock Exchange and international markets – as aresult of the offer, the company received US$200m.(xiii) Banco Santander, S.A. sold 25% of its capital stock in Mexico through a public offer in theMexican Stock Exchange; the company decided to pursue this offer in order to reinforce the capitalstructure of the company.(xiv) In the last few weeks, the CFC rejected the authorisation of Nestlé’s acquisition of Pfizer’snutrition line. The CFC informed that both companies compete in the infant milk formulas market,and that situation would result in a rise of Nestlé’s participation from 71 to 88% of the volume ofsales in such industry. Even though both companies filed before the CFC different alternatives,conditionings and arguments, the CFC resolved that they were not sufficient to prevent the potentialdamage to the competitive process. Key DevelopmentsThe Federal Law for the Prevention and Identification of Money Laundering (“Ley Federal para laPrevención e Identificación de Operaciones con Recursos de Procedencia Ilícita”) was published onOctober 17th, 2012 and will become effective on July 16th, 2013. Pursuant to such law, lawyers or anyprofessional advisors drafting paperwork or representing clients in mergers and acquisitions mustapply customer-identification procedures (know your customer) and report events to the Ministry ofFinance and Public Credit.Likewise, a very relevant reform to the Mexican Labor Law was published on November 30th,2012 and became effective as of December 1st, 2012. In addition to many other reforms to labourregulations, the bill sets forth that any company that transfers employees to another company todecrease their benefits may be subject to administrative fines. Note that this structure was commonlyused in acquisitions in order to change the compensation package of the employees of the targetcompany. The amendment also increased the risk of outsourcing companies being disregarded forthe purposes of employment law and for employees to bring direct employment claims against theclients of outsourcing companies. Industry Sector FocusThe financial industry was probably the most active in mergers & acquisitions during 2012 in termsGLI - Mergers & Acquisitions Second Edition 102© Published and reproduced with kind permission by Global Legal Group Ltd, London
  6. 6. Barrera, Siqueiros y Torres Landa, S.C. Mexicoof the size and importance of its transactions. In 2012, we saw the IPO of Santander México,acquisitions and IPOs in the unregulated financial services market, acquisitions of Mexican insuranceand bonding companies by large insurance conglomerates, consolidation of two of the largestpension-fund managers in Mexico (Afore Banorte and Afore Bancomer) and other transactionsdescribed above.The beverage industry had two large transactions in 2012, of which the most relevant is the buyoutof the Mexican shareholders of Grupo Modelo by AB InBev.In terms of number of transactions, some other industries had a significant activity in mergers &acquisitions, as provided in the Graphs 2 and 3 below. Graph 2 – 2011 6.98% Chemical industry 8.14% Credit & finance institutions, not stock market 12.79% Manufacture of transport 72.09% equipment Others Graph 3 – 2012 p 7.69% 7.69% Manufacture of transport equipment 9.23% Temporary accommodation services 12.3% 63.07% Alimentary industry Real estate services OthersIn relation to the merger & acquisition activities for each industry during the last two years, theManufacture of Transport Equipment since 2011 and through 2012 remained stable. However, in2012 other different industries participated in the top per cents of such transactions, such as the FoodIndustry and the Temporary Accommodation Services. None of the industries reached 15% of thenumber of transactions, which means that there is not a predominant industry in terms of number oftransactions. Other industries that participated in the merger and acquisition activities in 2012 arethe chemical industry, credit and finance institutions, bonding and insurance as well as food & drugs,tobacco, telecommunications and others.GLI - Mergers & Acquisitions Second Edition 103© Published and reproduced with kind permission by Global Legal Group Ltd, London
  7. 7. Barrera, Siqueiros y Torres Landa, S.C. Mexico The Year AheadMexico has successfully undergone a new democratic transition. In that context, Mexico hasbeen recognised not only as a politically stable country, but most importantly as one with verygood economic prospects. Mexico has thus come to the attention of foreign investors due to itsmacroeconomic stability (i.e., controlled inflation, low deficit, stable balance of payments, etc.) Thestars seem to be aligned for a big increase in Mexico’s economic performance. There are someclouds in the horizon, namely the “fiscal cliff” in the USA but, for the first time in decades, Mexicois not either in a crisis of its own or affected by one overseas. In the absence of some major obstacle,business in Mexico should see a huge increase and GDP growing at rates exceeding five percentagepoints. The internal market (and M&A activity in the internal market) may be significantly fuelledif structural reforms are approved by Congress (a recent “Pact for Mexico” signed by all majorpolitical forces is a significant indication of cooperation to pass significant reforms, somethingthat was thought impossible until recently). The expectation is to see reforms in the energy andtelecommunications sectors that could foster internal growth; subsequent changes to the tax andpolitical framework are being considered. Because Congress is divided and the President’s partydoes not have the absolute majority, the combination of political forces is certainly the key to successin the pursuit of new laws that foster competition, growth, justice and equality. *** Endnote1. All information about mergers and amounts was obtained from the website of the Mexican Federal Competition Commission at Last visited on December 12th, 2012.GLI - Mergers & Acquisitions Second Edition 104© Published and reproduced with kind permission by Global Legal Group Ltd, London
  8. 8. Barrera, Siqueiros y Torres Landa, S.C. Mexico Juan Francisco Torres Landa Ruffo Tel: +52 55 5091 0157 / Email: Juan Francisco Torres Landa Ruffo is a Partner with Barrera, Siqueiros y Torres Landa in Mexico City. He practises in the areas of corporate, foreign investment, environmental, real estate, foreign trade, immigration and general contract law. Mr Torres Landa has been recognised as a leading attorney in his areas of practice in Mexico, designated by Latin Lawyer in 2004 as among the top 40 lawyers in Mexico under 40, and in 2006 by the recognised magazine of “Poder y Negocios” as one of the 13 more influential lawyers in all of Mexico. Mr Torres Landa received his basic Mexican legal degree from the National Autonomous University of Mexico where he graduated in 1988, and received an LL.M. degree from Harvard Law School in 1990. During the second half of 1990 Mr Torres Landa had a six-month internship with Wilmer, Cutler & Pickering in Washington, D.C. Mr Torres Landa has been a Corporate Law professor at both the National Autonomous University of Mexico and the Universidad Iberoamericana, both in Mexico City. Mr Torres Landa is a member of the IBA, the Mexican Bar Association, was the Co-Chair of the Mexican Law Committee of the ABA, served as the President of the Harvard Club of Mexico until January 2001, and as Secretary of Mexican United Against Crime since 2005. He is also a member of the AIPN (Association of International Petroleum Negotiators). He has published several articles in law journals and specialised magazines, and has participated in many seminars dealing with legal orientation in Mexico. Federico de Noriega Olea Tel: +52 55 5091 0154 / Email: Federico de Noriega Olea is a senior associate with the law firm of Barrera, Siqueiros y Torres Landa in Mexico City. He practises in the areas of mergers & acquisitions and corporate finance. Mr De Noriega has been recognised as an “associate to watch” in the practice of “Banking & Finance” by the renowned magazine Chambers & Partners, in its 2011 and 2012 editions. Mr De Noriega received his basic Mexican legal degree from the Universidad Iberoamericana of Mexico where he graduated in 2005, and received an LL.M. degree from Harvard Law School in 2007. During the second half of 2007 and during 2008 Mr De Noriega worked as a foreign associate of Sidley Austin, LLP in New York, New York. Mr De Noriega has been admitted to practise in the State of New York, USA. Alejandra Parra López Tel: +52 55 5091 0162 / Email: Alejandra Parra López is a candidate for a law degree at the Instituto Tecnológico Autónomo de México (ITAM), from which she expects to graduate in 2012. For the last two years she has worked at the law firm Barrera, Siqueiros y Torres Landa, in Mexico City. She has focused her law practice in the areas of insurance, mergers & acquisitions and corporate finance. Barrera, Siqueiros y Torres Landa, S.C. Paseo de los Tamarindos 150-1, Bosques de las Lomas, 05120, Mexico, D.F., Mexico Tel: +52 55 5091 0000 / Fax: +52 55 5091 0123 / URL: - Mergers & Acquisitions Second Edition 105© Published and reproduced with kind permission by Global Legal Group Ltd, London
  9. 9. Strategic