Brazil regulator approves Localiza sale to BAM

https://www.nasdaq.com/articles/brazils-antitrust-body-appro…

Brookfield buying about 50,000 cars for 3.57B reais (~$687M). That’s something like $14-15K (USD? CN?) per vehicle.

I like to see BAM active in Brazil. Not so sure about buying a boatload of cars (presumably for rental or resale, whichever looks more profitable). Cars are prone to big supply/demand imbalances that can change relatively suddenly. They also depreciate rapidly. Margins on sales are often uninspiring. Was this really the best option they have in Brazil at the moment?

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Was this really the best option they have in Brazil at the moment?

Dunno if it’s the best, they have a lot of stuff going on there, but it’s consistent with their plan for Ouro Verde, a fleet management company that BBU, the private equity arm, bought in 2019.

It is using Brookfield’s capital to expand its fleet and move into new industries (mining, forestry, sanitation, according to reports). Less than 1% of Brazil’s corporate vehicle fleet is rented, according to the CEO, making it a market ripe for expansion. This transaction takes advantage of a required divestiture by two merging competitors to increase vehicle inventory at bulk prices.

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I see I’m playing catch-up here. I see Ouro Verde in the list of partially owned subs in the BBU 10Ks, but haven’t ever taken a look at the thing itself: https://www.ouroverde.net.br/. Any good sources on Brookfield’s interest/involvement (particularly in English) would be much appreciated!

Any good sources on Brookfield’s interest/involvement (particularly in English) would be much appreciated!

If you open the website in Chrome, a Google Translate popup should offer to convert it to English.

Here’s the BBU release detailing the purchase of a majority stake in 2018 and of all the remaining equity in 2019:

https://bbu.brookfield.com/press-releases/brookfield-busines…

Here’s the ownership breakdown on Ouro Verde’s site (hopefully translated) showing all shares owned by a Brookfield Brazilian sub:

https://ri-ouroverde-net-br.translate.goog/ouroverde/web/con…

Here’s a backgrounder on a capital infusion from Brookfield earlier this year and Ouro Verde’s plans for it:

https://valorinternational.globo.com/business/news/2022/03/2…

Here are reports from Bloomberg and Reuters earlier this month speculating on this deal getting done:

https://www.bloomberg.com/news/articles/2022-06-02/localiza-…

https://www.reuters.com/article/unidas-ma-localiza/update-2-…

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I like to see BAM active in Brazil. …

I do too, if only because of the history.
Brookfield was once called Brascan, which was short for the original name: The Brazilian Traction, Light and Power Company Limited, the name in 1912.
Brazilian power operations started before that, in 1899.

The role of plucky foreigners doing business in Brazil is not exactly new to them.
They probably have a bit of a corporate sense of when to be a vulture and when to be a tatu-bola*.

Jim

  • Brazilian three-banded armadillo: great defences.
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