Category: Equity

While the US markets took most of this week off, Brazilian IPO hopefuls were busy updating their filings to go public. On July 18, beef producer Minerva hopes to price 27.6m shares at BRL15.50-BRL21.50 to raise $264m, according to Dealogic. Kroton Educacional, a privately held school operator, unveiled Monday plans to issue 12.3m shares at BRL31.00-BRL39.00 via Morgan Stanley and Merrill Lynch on July 20, to raise $222m. And Banrisul, a state-owned mid-market focused bank, updated Tuesday its filing to go public by establishing a price range of BRL10.50-BRL13.50, bringing the expected value of the deal to $1.245bn. The offering is slated to price July 25, and is being brought by Credit Suisse and UBS Pactual.

Invest Tur, a private equity fund focused on Brazil’s tourism real estate market, has launched an IPO scheduled to price in mid-July that will raise between $300m-$400m via Bovespa. The company, headed by Carlos Novis Guimarães, former private-sector coordinator at the IDB, has no assets, and is looking to lure institutional buyers with the management’s credibility and their ability to execute profitable trades in Brazil’s tourism real estate sector. “We already have a $1.2bn pipeline that has been developed over the past three or four years,” Guimarães tells LatinFinance, adding despite the lack of assets, Invest Tur will be listed on the Novo Mercado, Bovespa’s highest corporate governance category. Institutional buyers in the US, Europe, Brazil and Asia will be offered bundles of 30 shares, at $1,000 per share. Credit Suisse, the sole lead, together with the company’s four founding partners, conceived the relatively novel structure for the Brazilian market, says Guimarães, who says the proposal fully aligns managers’ and investors’ interests. This is the second shell acquisition company to go public in Brazil, though it is the first time 100% of the capital is being raised with investors. BrasilAgro raised $276m in a late April IPO, also via Credit Suisse, promising to score agriculture sector deals, though a significant portion of the equity came from the company’s managers.

The CVM, Brazil’s market regulator, is increasing its scrutiny of executive compensation packages and pre-IPO loans of companies that are looking to go public, Maria Helena Santana, head commissioner at the CVM, tells LatinFinance. “We’re seeing executive compensation packages with stock options that represent sizable portions of the capital being raised in the offering,” says Santana, adding as the number of companies made up of assets assembled with the specific purpose of going public has increased in Brazil. In tandem, lavish compensation packages for managers whose long term interests aren’t necessarily aligned with those of public investors have also grown. “We’re insisting they provide more transparency on these packages, with details on the amount of options, vesting periods and dilution.” Another development is the pickup in pre-IPO loans made by underwriters to IPO hopefuls to bolster capital bases and dress up balance sheets. The loans are often convertible into equity once the company goes public. “We want investors to know that this type of transaction is taking place and to evaluate the conflict of interest risk [inherent] in these operations,” says Santana.

Colombia’s largest retailer, Almacenes Exito, is planning a private placement of its shares via the New York Stock Exchange, according to a filing with the securities regulator. Exito will sell ADRs to a group of investors that includes French retailer Casino Guichard Perrachon, which controls Exito, and Colombian pension funds, among others. Exito did not give details of the amount of the share sale or the timing of the transaction.

Drogasil, a Brazilian pharmaceutical chain, is set to price 22,764,661 ordinary shares in an IPO on Bovespa and in a 144a registered deal in the US today, Thursday. The price range for the sale is between BRL12 and BRL15 a share for a total deal value of $151m, according to Dealogic. UBS Pactual and Bradesco BBI are leading. Logistics firm Tegma Gestão Logísitca is also slated to raise up to $300m in a Brazilian/144a sale of 299,277,606 ordinary shares at an initial price range of BRL26-BRL32 reais. JPMorgan and Unibanco have books.

Cosan, Brazil’s largest sugarcane grower and ethanol producer, announced Monday through an SEC filing, plans to issue up to $2bn in shares on the New York Stock Exchange. The Bovespa-listed company is applying for a US ticker listing and will also list Brazilian depository receipts on the Bovespa. A majority of the proceeds are being used to expand greenfield operations in Brazil, build out existing operations, purchase equipment and improve operations. Last week, an executive at Archer Daniels Midland told the WSJ he didn’t discount the possibility of acquiring Cosan, a plan that may now be hampered by the large float. Cosan listed its shares on the Bovespa in Nov. 2005, and has issued over $1bn bonds across four issuances since 2004 using Morgan Stanley and Credit Suisse. The $2bn share listing is being managed by Credit Suisse, Goldman Sachs and Morgan Stanley.

Barclays Global Investors (BGI) said Wednesday it had launched the first exchange traded fund in Mexico that offers exposure to Brazil. “The iShares MSCI Brazil Index fund provides Mexican investors an additional vehicle to express their investment views in this expanding and large economy in Latin America,” says Daniel Gamba, MD of the Latin America institutional business for BGI. The iShares index is listed on the mercado global section of Mexico’s BMV, giving access to Afores. According to BGI, there is a strong local Mexican bid for Brazil exposure. In May, the iShares MSCI Brazil fund saw $263m in inflows, Gamba adds.

Peru’s Intergroup Financial Services is out with a $328.9m IPO through Citi and Credit Suisse. It includes a $185.9m international tranche and a $143.0m local piece targeted at Peruvian institutional and retail investors. The initial price range was $12-$14, according to Dealogic and it was expected to price late Wednesday.

Chilean real-estate developer Socovesa is planning an IPO in Setember and is registering with the SVS local securities overseer. The developer, with annual sales around $200 million, is in the middle of buying out another local developer, Almagro SA. Once the buyout is complete, Socovesa will be the biggest developer in the country.
The developer, with annual sales around $200 million, is in the middle of buying out another local developer, Almagro SA. Once the buyout is complete, Socovesa will be the biggest developer in the country.

Brazil’s Redecard, a credit card company jointly owned by Unibanco, Itaú and Citi, will this week launch a Brazilian roadshow for an IPO, set for the second week of July, that will raise at least $1.7bn. The company is looking to price 140.8m shares, plus an additional 35% in a greenshoe, at BRL20-BRL25. Selling shareholder Itaú has the option to vend an additional 15%, while bookrunners Unibanco (lead), Itaú BBA and Citi can exercise a 20% greenshoe. A Bradesco BBI report values Redecard at BRL15-BRL17bn once it goes public. Roadshow stops are scheduled in Europe and the US. This is the first credit card company to go public in Brazil and if executed as planned, will be the largest IPO in the country’s history. Brazil’s consumer lending market has ballooned in the past two years as interest rates have moved steadily south.