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Cobaltum Advises Putney Capital in its acquisition of a 50% stake in Colombian steel mill, Diaco S.A., from Gerdau

Cobaltum Advises Putney Capital in its acquisition of a 50% stake in Colombian steel mill, Diaco S.A., from Gerdau

Cobaltum Advises Putney on Acquisition of 50% stake in Gerdau Diaco
Transaction Overview:
  • On June 30, 2017, Putney Capital Management, Ltd. (“Putney”) announced the acquisition of a 50% stake in Diaco S.A. (“Diaco”) from Gerdau S.A. (“Gerdau”), which retained a 50% stake in the company
  • Founded in 1961, Diaco is the largest steel maker in Colombia with an installed capacity of over 670,000 tons/year of crude steel and the largest scrap iron recycling plant in the country.  The company’s main production plants are located in Tocancipá, Muña and Tuta.  The company offers a wide portfolio of products focused primarily in the civil construction and industrial sectors
  • Putney is an asset management and private equity investment firm focused on the industrial and energy sectors throughout the Caribbean, Central America and NOLA.  Putney is an affiliated partner of INICIA and currently manages INICIA’s energy and industrial investment portfolio.  Putney was founded in 2007 with offices in Santo Domingo, Dominican Republic and San Juan, Puerto Rico
  • Gerdau S.A. (BOVESPA:GGBR4 / Market Cap: ~$5.7 billion) is a leading producer of long steel in the Americas and one of the largest suppliers of special steel in the world. It has industrial operations in 14 countries – in the Americas, Europe and Asia – which together represent an installed capacity of over 25 million metric tons of steel per year.  It is the largest recycler in Latin America and around the world it transforms, each year, millions of metric tons of scrap into steel, reinforcing its commitment to sustainable development in the regions where it operates
Strategic Rationale:
  • Extension of a Successful Partnership: Putney and Gerdau have a successful existing partnership in the Dominican Republic (Gerdau Metaldom).  Putney was a logical choice when Gerdau decided to reduce its ownership stake in Diaco as part of a larger deleveraging and corporate restructuring process
  • Regional Diversification: Putney is a strategic investor in the steel industry, and the Diaco transaction presented a unique opportunity to acquire a joint-control stake in the leading steel producer in Colombia, the fourth largest economy of Latin America
  • Attractive Valuation / Significant Upside: Putney achieved an attractive entry valuation that will allow it to generate strong long-term returns.  Putney has identified a number of growth opportunities and synergies that it will seek to implement in partnership with Gerdau

Cobaltum Role / Results:
  • Cobaltum acted as the exclusive strategic and financial advisor to Putney
  • Cobaltum advised Putney in the negotiation, structuring and execution of the acquisition of a 50% stake in Diaco from Gerdau, as well as in the structuring and negotiation of a new shareholders agreement and non-recourse acquisition financing
  • Cobaltum obtained an attractive valuation, strong liquidity and governance terms for Putney, positioning our client to achieve attractive, risk-adjusted long-term returns
  • Cobaltum was instrumental in achieving a successful closing, managing a highly complex transaction involving a long negotiation process and many moving parts, including asset sales, spinoffs and debt refinancing