Chile Peso Leads Regional Gains After Nation’s Biggest M&A Deal

Chile’s peso led gains in Latin America amid speculation that Abbott Laboratories’s $2.9 billion purchase of the nation’s biggest drugmaker will bolster the flow of dollars in the local foreign-exchange market.

The peso advanced 0.6 percent to 550.25 per dollar at 12:20 p.m. in Santiago, the most among seven Latin American currencies tracked by Bloomberg and the biggest gain in emerging markets after India’s rupee.

CFR Pharmaceuticals SA’s sale to Abbott Park, Illinois-based Abbott Laboratories would be the biggest takeover of a Chilean company in at least 40 years, according to data compiled by Bloomberg. Abbott will pay in dollars for holding company Kalo Pharma Internacional SA, which indirectly owns 73 percent of CFR, spokesman Scott Stoffel said in an e-mail.

“It’s potentially a lot of money coming into Chile,” Alejandro Araya, the head of foreign-exchange trading at Banco Santander Chile in Santiago said by phone.

Abbott, the world’s largest maker of heart stents, has until Nov. 3 to complete an offer for the 27 percent remaining shares not held by Santiago-based CFR’s controlling family, the son and grandsons of its founder. The offer for remaining shares can be settled in dollars or pesos depending on the seller’s preference, CFR said in a statement to the securities regulator.

“We still don’t know all the details of the transaction, such as how much will be for dollars,” said Sebastian Ide, the head of trading at Banco de Chile in Santiago. “If they sell $1 billion of dollars that would move the market, but it could be done in two or three days with no problem.”

South Africa

CFR sold shares to the public in 2011, raising $370 million to bolster expansion efforts in drug development and distribution. The company called off a $1.2 billion offer to buy South Africa’s Adcock Ingram Holdings Ltd. in February after failing to win support from shareholders.

Foreign investors in the Chilean peso forwards market cut their net short peso position by $415 million on May 14 to $12.5 billion.

The central bank kept its benchmark interest rate at 4 percent yesterday after prices rose at the fastest pace in five years in April. The two-year swap rate climbed two basis points, or 0.02 percentage point, to 3.9 percent.

“The central bank pause and the statement that showed a degree of concern on inflation has pushed up local yields,” Araya said. “U.S. yields have been falling, so the carry cost of being long dollars in Chile is expensive.”

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