(Bloomberg News circulated the following article on March 30.)
MEXICO CITY — Grupo Mexico SA, the world’s seventh-largest copper producer, has the financial capability to buy a company for as much as $6 billion, said Chief Financial Officer Eduardo Gonzalez.
The Mexico City-based company is seeking to make acquisitions as record copper prices boost its earnings, Gonzalez said. The company could use more than $1 billion in cash, new debt and shares to pay for an acquisition, he said.
“The range could be anywhere from $500 million to $5 billion or $6 billion,” Gonzalez said in an interview at the company’s headquarters. “We have the possibility of easily accessing the markets with more debt or bonds or using our currency, which would be the shares.”
Grupo Mexico, which defaulted on more than $450 million of debt in 2001, is now flush with cash after copper prices jumped 86 percent in the past year and more than in since June 2004. Copper rose to a record high of $2.4770 per pound on the Comex division of the New York Mercantile Exchange as of 11:51 New York time.
The company expects to have earnings before interest, taxes, depreciation and amortization — a measure of cash flow known as Ebitda — of more than $2.4 billion, up from $2.3 billion in 2005, Gonzalez said. From that Ebitda, Grupo Mexico will have more than $1.15 billion of cash to buy companies or pay dividends, he said.
Grupo Mexico, which owns Mexico’s largest railroad measured by length of track, is analyzing acquisitions in the infrastructure and transportation, such as airports, ports, warehouses and railroads, as well as the mining industry, Gonzalez said.
“This doesn’t mean we’re going to do something crazy,” he said. “This means were not going to leave behind attractive opportunities.”
At the end of 2005, Grupo Mexico has debt of 1.72 billion and cash of $1.26 billion. The company doesn’t plan to reduce debt, Gonzalez said.