After selling one of the largest financial institutions in Mexico to HSBC for a fortune, banker Antonio del Valle Ruiz settled behind the desk of the president of Mexichem and dusted off his checkbook. One by one, different businesses in the region came to form part of his fl uoride and vinyl chloride producer’s portfolio. But it wasn’t until the beginning of this year, with the purchase of Amanco, an $800 million a year invoicing gorilla, that eyebrows shot up.
A banker running a chemical company? And more than that: A banker running a chemical company well? And even further: A banker becoming a leader in the consolidation process of the Latin American chemical industry? Yes to all. And, yes to all because there isn’t anything more to the story than more than 30 years of consistent work that recently came to light under special conditions--having swallowed a big fish , like Grupo Nueva’s PVC manufacturer. This is the story of Mexichem and Del Valle Ruiz, a banker familiar with the periodic table of elements.
Son of textile manufacturers, he would begin his alchemies in 1974, entering the fi nancial sector with Bancrecer, a credit and service bank, a debut that would be cut short with the nationalization of the bank by president Jose Lopez Portillo’s administration. Then, Del Valle Ruiz would initiate the other half of his corporate life creating the chemical companies Grupo Primex and Pennwalt.
Del Valle Ruiz would come to understand over the years, that neither of his two halves, the banker and the industrialist, could survive alone. Thus, the purchase of Banco Internacional in the 90s, would bring him back to the fi nancial world, together with two other traditional Mexican families, Esteve and Berrondo. The whipped cream on top was that the return also included the purchase of the Arka trading house, today a medium-scale Mexican capital operator. Renamed Bital, the bank would become the fi fth fi nancial entity in the country to be looking at the lowest sectors of the middle class.
But when the financial turn back came together, Del Valle Ruiz again remembered his bicephalic condition. Bital had become as strong as the differences between the partners, and therefore they decided to settle in in 2003, selling their shares to HSBC for $1.14 billion. So, the door opened for the restless banker to wear a different hat yet again--and this one maybe permanently.
Del Valle Ruiz got behind Mexichem and began the raid that has made the company--and him as well--the talk of the town. The method: a hot checkbook and good stock management and strategy. Since 2005, Del Valle Ruiz has bought several chemical companies in Mexico and a distributor, and diversifi ed into industry and graphic arts, while maintaining control of Las Cuevas Mining, the largest fluorite producer in the world.
In 2005 alone, buoyed on high commodity prices, Mexichem’s sales rose by 145%, fi lling Del Valle Ruiz’s pockets for the international raid that this year would give him ownership of Colombian firms Petco, Geon Andina and Grupo Amanco, one of the largest PVC producers in the region.
The results are obvious. In 2006, Mexichem’s sales reached $ 1.1 billion, 36% more than the previous year. Their central business--the double chain of fl uoride and vinyl chloride--has made them a leader in Latin America in chemicals, petrochemicals and PVC.
Mexichem sales increased 104% in the last nine months of 2007The company might have the only platform able to consolidate the entire industry, but this is also costly. With the purchase of Amanco and Petco, Mexichem’s debt nearly quintupled from the $161 million accumulated in 2006. And although he already reduced their liabilities by $200 million by getting out of the distribution and iron and steel business, he still hasn’t convinced Standard & Poor’s analysts, who moved the prospectus of his Mexican debt from stable to negative in August. Translation: the market believes that Del Valle Ruiz will continue to eat businesses for lunch, even though he hasn’t finished digesting the big bites from breakfast.
All in all, the operational cash flows and availability in the hands of Mexichem are reasonable, and geographic diversifi cation of the companies reduces their exposure to the vulnerability of prices. Looking at it this way, the panorama doesn’t seem so critical and, for now, Del Valle Ruiz breathes. Every alchemy needs time.
