Argentina’s M&A Market Sees New Momentum Under President Milei

By Velizar Velikov, Head of M&A Database at EMIS

The election of libertarian economist Javier Milei as President of Argentina has reignited international investor interest, reminiscent of the enthusiasm seen during Mauricio Macri’s early presidency in 2015. The IMF has lauded Milei’s pro-market initiatives, including a 50% currency devaluation and plans to lift capital controls, although it remains cautious about the social impact of these reforms.

As of now, the S&P Argentina ADR Index has surged more than 30% year-to-date, signaling renewed investor confidence. Despite the absence of new IPOs, the local M&A market is showing signs of activity. The year 2023 saw a trend of international companies like Lactalis, Inditex, and Fresenius Medical Care withdrawing from Argentina. The early months of 2024 are also marked by strategic exits by firms like HSBC and Nutrien mainly refocusing on their core markets, with HSBC’s local business reportedly selling for USD 550mn and Loma Negra poised for a USD 700mn sale.

There is also an uptick in interest from foreign investors in sectors such as oil and gas. Rumors suggest ExxonMobil might divest its shale assets in Argentina for about USD 1bn. Additionally, companies like Tesla are exploring opportunities in the lithium sector, and GeoPark has announced discussions to acquire shale stakes in the Neuquen Basin for USD 200mn, with further commitments for exploration activities.

President Milei has shelved plans to privatize state-owned oil company YPF but proposes privatizing 18 other government entities, down from an initial 40. This list includes major organizations like Nucleoeléctrica Argentina, Aerolineas Argentinas, and Banco Nacion, potentially opening substantial opportunities for international bids.

Despite doubts about Milei’s ability to overhaul Argentina’s economy, marred by decades of mismanagement, investor sentiment is currently strong, suggesting 2024 could be a pivotal year for M&A activities in Argentina. However, analysts caution that valuations might be reaching unsustainable levels, reminiscent of the 2016-2017 optimism that fizzled out. 

The World Bank predicts a 2.8% GDP contraction for Argentina in 2024, and Milei’s success in implementing free-market reforms remains uncertain, given his party’s minor representation in the National Senate. Lifting the “cepo” or capital controls will be crucial for fostering M&A activity, as current restrictions hinder the repatriation of dividends from acquisitions or private equity deals.

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