Share Slide Roughs Up Marfrig Sale

Brazil’s Marfrig has priced a BRL1.05bn ($495m) equity follow-on, coming at an 11.6% discount and seeing weak demand after its share price dropped 22% during Monday and Tuesday. The meatpacker is offering 131m shares, including a 15% greenshoe and part of a 20% hot issue, at BRL8.00 each, according to the CVM, versus Tuesday’s BRL9.05 closing price. The sale was heard to be more than 1x subscribed. The sizeable discount comes after shares plummeted 15.5% in Tuesday’s session, following a 7.7% drop Monday. Marfrig had been aiming to raise more than BRL1.2bn. Additionally, the Comissao de Trabalho, Administracao e Servico Publico committee in Brazil’s congress has requested that company officials explain BNDES’s participation in the transaction, specifically its plans to convert fewer than 100%of the convertible debentures it holds, according to local press reports. The development bank owns 14% of Marfrig. “The shares have been falling in anticipation of this offering. It has likely been a difficult sell,” says an equity analyst following the company. He notes high leverage as among the major concerns. Indeed, the sale was done with reducing debt in mind, and was expected to reduce Marfrig’s net debt by 0.7x, from 5.7x Ebitda, according to Barclays. Its debt was downgraded to B1 from B2 in August, due to leverage concerns. BNDESPar, which holds BNDES’ minority stake, and controller MMS and were expected to exercise their full rights in the offering. Marfrig plans to use proceeds to repay debt and to strengthen its capital structure. Bank of America Merrill Lynch, Bradesco, Itau, Banco do Brasil, Deutsche Bank and Santander managed the sale. Peer Minerva fared a bit better last week in a smaller follow-on sale, raising BRL557m. Next up is Chile’s Sonda, releasing pricing this morning after closing books Tuesday on a deal targeting $160m-equivalent. Thursday is scheduled to bring a BRL1.30bn follow-on from Equatorial Energia and a more than $1bn-equivalent IPO of Macqu