Category: Equity

Brazilian sugar producer Cosan should price a global follow-on offering, which is also its US IPO, today. The offering of 100m Class A shares in the US and Class A shares in the form of Brazilian depositary shares in Brazil will allow Cosan to incorporate in Bermuda and propel the company into the global ethanol industry. Bankers away from the deal expect it to fly on global demand for ethanol stocks, in spite of a negative response from some minority shareholders to the reorganization. Cosan listed on the Novo Mercado, the segment of the Brazilian stock exchange with the highest standards of corporate governance. Cosan’s stock closed at the BRL equivalent of $12.98 yesterday, down from $18.71 on June 25 when the deal was announced. The company will sell the 100m shares based on the last offer price, and the underwriters have a 15% over allotment option. After the global offering, Cosan will launch an offer to minority shareholders to exchange their existing Class A shares of Cosan SA, traded in São Paulo, for BDRs. The restructuring will ensure controlling shareholder Rubens Ometto Silveira Mello maintains control over the company. Credit Suisse, Goldman Sachs and Morgan Stanley are leading.

Mid-sized Brazilian bank Banco Fibra has filed to list on the Bovespa. The shares will be listed in Brazil and sold to foreign buyers in the 144a market in the US. The IFC invested $20 million in June to take a 7.9% stake in the bank, which is owned by Brazilian steel conglomerate CSN. Fibra will be the seventh Brazilian bank to list locally this year. Credit Suisse and Itaú BBA are leading. Credit Suisse is also heard to be bookrunner on two other IPOs filed with the CVM last week, real estate firm Mora Dubeux Engenharia and meat, dairy and vegetable producer Eleva Alimentos.

MercadoLibre, the LatAm equivalent of online market place eBay, priced Friday a $289.4m Nasdaq IPO at $18 on Friday, the high end of the $16-$18 range. Shares in the Argentina-based firm traded up to $29 and closed just shy of that, according to Reuters. The deal priced in the most volatile global stock market environment seen since the aftermath of the 9/11 terrorist attacks. The Nasdaq fell 0.45% Friday but closed off the low. MercadoLibre will use proceeds to repay a loan from eBay and for general corporate purposes. EBay will own an 18.5% stake in the company after the IPO. JPMorgan and Merrill Lynch were the leads.

Foreign investors pulled a net $1.74bn out of Brazil’s Bovespa in July, according to the exchange. This is the biggest net reduction this year and coincides with global equity volatility. International investors bought $18.22bn equivalent in the month but sold $19.96bn equivalent in Brazilian stocks. The Bovespa saw average daily turnover of $2.6bn and international investors were the biggest single traders, with 35.52% of the monthly volume. In July, the Bovespa’s market cap reached $1.13trn.

MercadoLibre, the Argentine computers and electronics firm, has a $273.3m-$314.3m IPO lined up for Thursday via JPMorgan and Merrill Lynch, according to Dealogic. The initial range is $16-$18 on the SEC-registered deal. The issuer is an online auction and trading platform.

Corpbanca, the Chilean financial institution, has priced a $72.5m equivalent offer of domestic 5-year bonds at 3.20%, or 62bp over the corresponding government issue. The bonds were sold on the Santiago Stock Exchange and proceeds are to improve the balance sheet structure. The bullet is due July 1 2012. Corpbanca Asesorias Financieras structured the deal. It is denominated in Chilean inflation-linked units, or UF.

MercadoLibre, the Argentine computers and electronics firm, is lining up a $273.3m-$314.3m IPO via JPMorgan and Merrill Lynch, according to Dealogic. The initial range is $16-$18 on the SEC-registered deal. The issuer is an online auction and trading platform.

LatAm debt and equity markets have rebounded in tandem with global stocks and the mood is brighter after the storm. The Bovespa gained 3.12% to 54,572 while Mexico’s Bolsa rose 2.20% in Monday’s relief rally. Analysts saw the dip as a buying opportunity after months of overstretched valuations. “Fortunately, dedicated investors are stepping into the fray, buying up assets across the board,” says BCP, which is bullish overall on the commodity producer story. “Although there are concerns about the ongoing crisis, there has been no evidence of divestitures by dedicated accounts. We continue to see enormous value in the asset class, with unique buying opportunities in Argentine assets and local currency products,” it adds. However, Merrill Lynch for one sees more bloodletting in LatAm equity, and describes Brazil as a crowded trade. “We expect more downside. Technicals [and] sentiment suggest [it is] too soon to call the lows. Markets may be forced to re-price global growth lower,” says Merrill in a note on EM equity in general. After the correction, there was bound to be some short covering following a bearish overshoot. More downswings look likely short term and this week is heavy on US data releases that will keep participants nervous. Investors should remain cautious until the storm has fully passed. Companies and governments looking to price deals will likely have to wait.

LatAm equity markets continued mixed Friday, with the Bovespa down 1.8% but the Mexican bolsa rebounding modestly. Citi estimates that MSCI Latin America fell by 5.9% in dollar terms Thursday, the third worst one-day decline since immediately after the 9/11 terrorist attacks in 2001, but not as bad as February 27, when it declined 6.7%. “Crucially, as earlier this year, this latest meltdown has had nothing to do with events in Latin America itself,” says Citi, which has long been calling for a correction while maintaining that longer term, conditions are bullish. “This correction will play out similar to all of the earlier corrections in this bull market; we do not believe it is the start of a new bear market,” says Citi. “If current events do not pull the US economy into recession or cause the global economy to slow sharply, the current correction will simply create a new buying opportunity for Latin American stocks,” it adds. Citi tips the following defensive stocks for high dividend yields and low volatility: CTEEP, Eletropaulo, AES Tietê, Cemig, Entel, Ultrapar, Cemex, Natura, Bradesco, Embraer, AmBev, Grupo Televisa, Datasul, Copasa, Tele Norte Leste, Industrias Bachoco, Gruma and Walmex.

The Brazil unit of Arab Banking Corporation (ABC Brasil) has become one of only a few foreign-controlled companies to raise funds via an IPO on the Bovespa. It picked up BRL609m ($330m) from the sale of 45.1m preferred shares, with 44.4m via a primary offering and 700,000 through a secondary offer priced at BRL13.50 per share, in line with the bank’s initial guide of between BRL11.50 and BRL15.50. UBS led. ABC follows Banco Patagonia of Argentina, which last week listed its shares on the Bovespa. Its IPO earned the company BRL483.8m (US$260m).