Mid-Cap Homebuilder Sticks to IPO Guns

Direcional Engenharia is still planning to bring an IPO to the market, despite speculation that the deal will be pulled. “We are indeed continuing with the process and we plan on refilling [the prospectus] to the CVM with updated [September 30] financials,” says an executive close to the issuer. The homebuilder was strongly expected to desist from its attempt following a lengthy delay in updating its prospectus, first filed in August. As of Tuesday, the company had yet to update its filing with the customary financial details, deal timeline and expected pricing range. The delay is being attributed to issues regarding timing of the offering and other undisclosed reasons, says the executive. Investors and bankers off the deal have been unanimous in speculating the company had likely received a cool response from investors and ended up abandoning the sale. Since 2005, some 24 Brazilian homebuilders have done IPOs, though several have since been acquired by competitors. “Does the Brazilian market really need another homebuilder?” asks a US-based equity investor. In addition, Direcional’s intended market cap, which has not been made public, is expected to be either in the middle or closer to the lower end of the scale, which could make its bid more challenging as investors lean towards liquidity. In the first half of 2009, adjusted Ebitda stood at BRL40m, according to the initial prospectus. Net income rose 62% in the year between June 2008 and June 2009. Direcional is based in Minas Gerais state, and operates in the southeast and northern regions of Brazil. In 2008, Direcional sold a 25% stake to Tarpon for BRL250m. Santander is leading the equity sale, with Itau and Morgan Stanley as co-leads.