Westsphere Brasil Closes Two Deals –

SA PAULO, Brazil – Westsphere closed on two deals in late January worth 11 million Brazilian Real ($5.6 million) through its 50 million Real ($25 million) Fundo de Investimentos Recursos nas Empresas (FIRE) fund.

Duncan Littlejohn, a partner in the Sa Paulo office of New York-based Westsphere said the two investments fit in nicely with the firm strategy of providing expansion and growth capital for mid-sized Latin American companies.

Westsphere invested 7 million Reals ($3.5 million) in Open Commerce, a service provider to the small-and-medium-sized food and gas retail sector, with Banco Liberal, which contributed an additional 6 million Real ($3 million).

Westsphere also invested 4 million Real ($2 million) in Padron, a credit card manufacturer.

“Open Commerce has the possibility of very expressive growth,” said Littlejohn. “It could change the look of small and medium retail in Brazil.”

Littlejohn is referring to the fact that many transactions in Brazil are still executed with post-dated checks, a legacy of inflation. Open Commerce allows the retailer to spot check the consumer’s credit, which benefits small retailers in two ways. “These businesses would have been too small, and the banks would have discounted the revenue line,” said Littlejohn. “Second, it is standard for Brazilians to pay for both light and phone bills at their banks, but there are 5,000 towns in Brazil without banks. This will bring traffic to the local gas and food retailer. And it will also give them benchmarking information they can use to anticipate their customers’ needs.”

The Brazilian development bank, Banco Nacional de Desenvolvimento Ecnomico e Social (BNDES), actually created the FIRE fund last year and partnered with both Westsphere Brasil and Rio de Janeiro-based securities firm Dynamo, both of which manage the fund.

“BNDES has always been active in private equity from a development point of view,” said Littlejohn. “This is a pilot program to differentiate the monitoring of those companies. They wanted to increase the capability of deploying their assets, and they’re trying to provide private sector incentives to support small and medium sized businesses.”

The bank also hopes to support and develop capital markets in Brazil, he said, adding the partnership structure is not at all different from a traditional private equity fund.

FIRE’s portfolio, which includes both direct investments and those Westsphere inherited from BNDES, comprises 10 investments as diverse as Getec, a sugar-based chemical business, to Metal Ciclo, a recycling agency. The theme, according to Littlejohn, is to support small and medium-sized businesses with an eye toward “strategic relations and possible acquirers.”