Suzano Lands FO on Rough Day

Suzano Papel e Celulose has priced a BRL1.48bn ($712m) follow-on equity sale, coming at a slight discount after seeing shares fall 7.5% Wednesday due to an analyst price estimate cut. The Brazilian pulp and paper producer sold 119.6m common shares and 250.1m preferred shares, at BRL4.00 each, according to the CVM. The all-primary share total assumes the exercise of overallotments totaling 19.9m common shares and 52.2m preferred shares, the maximum allowed according to the sale’s prospectus. The price represents a 1.72% discount from Wednesday’s BRL4.07 preferred share closing price, with the stock dropping 7.5% during the session, on a day when the Bovespa shed 1.35%. Barclays cut Suzano’s price target Wednesday, to BRL4.00 from BRL8.00, on a weaker pulp price outlook. “Even after the [follow-on] offering, we see net debt/Ebitda at 5.8x [year-end 2012] and 6.9x [year-end 2013]. Thus, we still see the need for other measures (asset sales and partnerships) to control leverage while Suzano executes its growth project,” Barclays says. Suzano had lost 37.1% from its May 16 launch through Wednesday’s close, and its deal was not helped by the fact that peer Fibria has sagged 10.4% since its follow-on in April. Suzano had upsized the share total during the sale process by about 20% from the originally announced amount, to ensure it would raise enough, and it appeared to need its full overallotments Wednesday to bring the deal close to the BRL1.5bn target. Suzano is raising funds to strengthen its capital structure. BTG Pactual and JPMorgan were global coordinators on the sale, with Banco do Brasil, Bradesco and Itau as bookrunners. The deal was the last of the region’s large offerings on the calendar as of Wednesday. A number of unlaunched IPOs remain in the pipeline, but with the global markets lacking certainty their status is unclear.