Luiza IPO Raises BRL926m at Bottom of Range

Magazine Luiza has priced a BRL926m IPO at the bottom of its price range, as equity investors continue to find valuations high even among stories they consider attractive. The Brazilian electronic goods and furniture retailer sold 38.6m primary and 19.3m secondary shares, at BRL16 each, according to the CVM. The total includes the exercise of a 15% greenshoe. Investors had said they found the deal attractive at the bottom of the BRL16-BRL21 price range, but rich at the midpoint or above. “This is a good play for the story of the emerging C and D classes, the valuation is the only concern,” says a New York-based EM equity investor prior to pricing. The result is a familiar one among Brazilian IPOs this year, as Luiza is only the fourth to price within its price range, with others falling below or choosing to postpone. Luiza’s selling shareholders in the secondary portion include US private equity firm Capital International, a stakeholder since 2005, and members of the founding Donato and Garcia families. The retailer, based in Franca in Sao Paulo state, plans to use 30% of the proceeds for new stores and acquisitions, 30% for working capital, 20% for improving old stores and 20% for technology and logistical improvements. Banco do Brasil, BTG Pactual, and Itau managed the sale. The transaction may mark the beginning of a lull in new Brazilian equity issuance. Six deals are filed, according to the CVM, and many others are rumored, but nobody has launched a deal since Luiza began marketing in the first week of April. The regional focus now shifts to Chile, with Corporacion Farmaceutica Recalcine scheduled to price Wednesday, an IPO that could top $400m equivalent.