Seabras to Offer First Test of Brazil IPO Appetite

Seabras Servicos de Petroleo will soon test new issue demand in the LatAm equity markets after launching an up to BRL1.44bn ($823m) IPO that, if successful, could mark the region’s first such transaction this year. The deal will also be a litmus test for an oil sector that had mixed results last year. The Brazilian unit of Norway’s Seadrill has set February 9 to price the sale of 48m primary shares, setting a range of BRL20.00-BRL26.00. This would indicate a BRL1.44bn deal at the top of the range, or a BRL1.1bn sale at the bottom, assuming a 15% greenshoe is used in each case. A 20% hot issue is also available. “In the short-term we have seen some momentum, and some positive movement in the Bovespa. Some of the stronger companies that have been on standby may now give it a try, but it will not be easy,” says a Rio-based portfolio manager. The oil sector saw Perenco and Karoon cancel IPOs last year, and the troubles at Petrobras supplier Lupatech aren’t welcome news, but investors say success should come down to price. “There is demand for this type of deal; it just depends on price. The oil industry deals that were cancelled last year were mostly due to price,” says a Sao Paulo-based equity investor. He adds that Seabras may be aided by having a US-listed parent, providing a possible reference for valuations. The owner of 3 drillships with long-term Petrobras contracts was spun off last year and is raising funds for acquisitions and other investments as it looks to cover a wider range of oil field services in Brazil. It generated BRL524.7m in Ebitda in the first 3 quarters of 2011, up from BRL371.2m in the corresponding period in 2010. It is also negotiating a 50-50 joint investment with pipe-laying support vessel operator and fellow Petrobras contractor SapuraCrest. BTG, Morgan Stanley, Banco do Brasil and HSBC are managing the transaction. Brazil Travel was also heard preparing to launch its IPO as soon as this week. Brazil’s Bovespa is up 9.9% so far this year, a