Linx Starts Brazilian IPO Year at High End

Linx has given the Brazilian IPO market the start it wanted this year, pricing a BRL528m ($265m) deal at the top of its range. In a stark contrast to the trend in 2012, the transaction drew 20x demand, according to people familiar with the terms. The provider of software to the retail sector priced 19.6m shares, assuming a 15% greenshoe, at BRL27.00 each, according to the CVM, versus a BRL23.00-BRL27.00 range. The total includes 6.8m secondary shares sold by a private equity fund linked to Itau. Betting that a retail focus and solid growth story would overcome the usual investor doubts about smaller deals, Linx came to market to raise funds for acquisitions and for working capital. “Investors have liked [larger public Brazilian IT provider] Totvs and its stability. They see this type of company put together with the expected growth in retail and it is an attractive proposition,” says an equity analyst following the sector. Throughout Brazil, retailers are becoming more sophisticated and needing IT services, he explains. New clients appear all the time meaning barriers to entry are low, through once long-term contracts are signed, it becomes harder to switch – favoring players that gain size and scale now and in the next few years. BTG Pactual, Credit Suisse, Itau and Morgan Stanley managed the sale. Linx offers both cloud-based and on-premises products for Brazilian retailers. It has been operating for 27 years and claims 29% market share. Elsewhere, the market awaited late Wednesday the pricing of National Commercial Bank Jamaica’s (NCB) equity follow-on representing the debut of is US ADRs. The bank would raise $224m if it priced at the midpoint of a $13.00-$15.00 range. Today, ECM attention now turns to the week’s heftier transactions, the $1bn IPO of Mexico’s Grupo Sanborns and the $600m SEC-registered IPO of Brazil’s QGOG Constellation.