Brazil Pharma IPO Prices at Low End

Brazil Pharma has priced a BRL465.75m ($293m) IPO, as investors were heard coming in for 4x demand. The retail pharmaceutical operation run by BTG Pactual sold 27m primary shares at BRL17.25 each, within the lower third of the BRL16.25-BRL19.25 range. The total includes a 15% greenshoe and a 20% hot issue. Early interest in the deal was heard coming from local buysiders who know BTG’s private equity business and BR Pharma’s chains, with foreign investors coming in later to eventually account for 60% of the deal. “It’s raising funds for consolidation of the sector, and Brazil Pharma is a good vehicle for more acquisitions,” says a participating Sao Paulo investor. In a sector where the top 5 players have less than 25% of the market, Brazil Pharma plans to use 70% of the proceeds for acquisitions, 10% for developing new products and 7.5% for improving its services. The remaining 12.5% will be used to pay shareholders of Drogaria Rosario and Guararapes, two recently acquired drugstore chains, in performance-related and stock option payouts. Bradesco, BTG Pactual, and Morgan Stanley managed the sale, which kicks off a brisk schedule of new Brazilian deals. Health insurance provider Qualicorp is scheduled to follow Monday with an IPO. Tuesday brings an IPO from watchmaker Technos and a follow-on from BR Properties, and Wednesday sees follow-ons from educator Kroton and Energias do Brasil. The week finishes with a follow-on from manufacturer Mahle Metal Leve Thursday and the IPO of E&P operation Perenco.