Natura Scores Thin Discount on Equity Follow-On

Natura has priced its anticipated equity follow-on offering at BRL26.50, a slim 1.3% discount to Thursday’s close and virtually flat to the opening price of BRL26.51. Final distribution terms were not available late Thursday, but if the Brazilian cosmetics company succeeded in placing an optional block of 7.4m shares in addition to the 49.3m originally scheduled to be sold, it will have raised BRL1.5bn. The small concession to investors indicates US accounts in particular put in a strong bid for Natura’s shares, say Brazil-based portfolio managers. Foreign investors generally consume upwards of two thirds of new issues in Brazil and tend put in their orders towards the end of bookbuilding. Some buysiders note the company’s bankers pushed hard to price the deal, whose proceeds are going towards company insiders who are selling shares, at the highest level possible. The secondary issue will increase Natura’s market cap by upwards of 15% and thus should merit a bigger discount, argues an investor whose shop bought the shares. Brazil-based equity managers say they hoped for a discount of up to 5%, though they are not surprised to see the deal price at the tight end, given how other trades like MRV (2.00%), Hypermarcas (2.10%) and Brasil Foods (1.45%) have priced. “This is an excellent company with great fundamentals,” says a Brazilian buysider. It remains to be seen how Natura’s shares will trade starting today, given Natura and its banks may have squeezed out much of the potential lift in the stock. Itau BBA, JPMorgan and UBS Pactual led.