Tecnoglass Inc., a manufacturer of architectural glass, windows and associated aluminum products, has entered into a joint venture agreement with Saint-Gobain through the planned purchase of a minority ownership interest in Vidrio Andino. The Colombia-based subsidiary of Saint-Gobain has annualized sales of approximately $100 million.
Vidrio Andino has been selling glass in Colombia and the region since 1997 and began production at its manufacturing facility located near Bogotá, Colombia in 2013, becoming the main supplier of float glass to Tecnoglass since then.
Vidrio Andino also plans to build a new glass manufacturing facility in Galapa, which is located approximately 12 miles from Tecnoglass’ existing production facilities. The new facility will have nominal production capacity of approximately 750 metric tons per day of float glass. Upon the expected completion of the new Galapa facility in 2021, Tecnoglass will benefit from the following:
- Access to ample float glass supply for anticipated growth, with Vidrio Andino more than doubling its float glass production nominal capacity;
- Reduced purchasing costs through expanded scale in its float glass procurement, elimination of raw material waste and lower inbound transportation costs given Galapa’s closer proximity to Barranquilla; and
- Control of nearly its entire production process, driving increased efficiency to provide enhanced service and improved lead times to customers.
“We are excited to partner with Saint-Gobain and to develop one of the most advanced and efficient glass production facilities in the world near our own plant network,” says Tecnoglass CEO José Manuel Daes. “This investment reinforces our vertical integration strategy and positions Tecnoglass to capture benefits from nearly the entire value chain of our high-quality architectural glass production. The joint venture secures our float glass supply and will generate significant synergies for years to come.”
“Over the past several years, Vidrio Andino has built a powerful brand and a trusted reputation for excellence as a glass supplier of choice in Latin America,” adds Xavier Pinot, general manager of Vidrio Andino. “By combining Saint-Gobain, a world leader in the manufacturing of float glass, with Tecnoglass’ proven high quality manufacturing acumen, Vidrio Andino will be able to accelerate its penetration in the region.”
The company’s investment for the minority interest in Vidrio Andino is approximately $45 million, which is expected to be funded with cash of approximately $34 million plus land contributed at an aggregate value of approximately $11 million. Tecnoglass intends to fund the cash portion of the transaction with cash on its balance sheet and readily available lines of credit, while maintaining a pro forma net leverage position in line with recent quarters. The transaction is expected to be completed in the second quarter of 2019.
The initial $45 million investment into the joint venture from Tecnoglass will be used to fund a portion of the construction cost for the new manufacturing facility near Barranquilla, which is expected to total approximately $160 million through 2022. The remainder of the construction cost is expected to be funded primarily through operating cash flow from the existing manufacturing facility in Bogota, debt borrowed at the joint venture level and pro-rata capital contributions from the shareholders over the multi-year construction period.
As part of this partnership, Tecnoglass and Vidrio Andino signed a long-term procurement contract stipulating the supply of glass from this float. Saint-Gobain already operates one float in Colombia, in Soacha, near Bogota. According to Saint-Gobain, this investment is in line with the group’s strategy of expanding its presence in emerging countries and an excellent opportunity to consolidate and strengthen Saint-Gobain’s long-term position in the region, especially at this important geographical junction between the South American and North American markets.