Brazilian IPO Struggles

Ser Educacional set a below-the-range price Friday for an IPO targeting BRL620m ($286m), before regulators stepped in to suspend the transaction on a technicality. The for-profit educator priced at BRL17.50 per share, according to people familiar with the terms, below the BRL19.50-BRL23.50 range. However, the CVM decided later Friday to postpone the sale for up to 30 days, due to “the prospectus not having complete, precise and current information,” the regulator says. The CVM adds that the suspension may be removed once the issuer corrects the problem. The effect on the pricing was not immediately clear late Friday. Ser is selling 35.4m shares, assuming a 15% greenshoe, at BRL17.50 each, indicating a BRL620m total. The deal had multiple times demand at its pricing point, according to a person familiar with the terms. Half of the base deal was to be secondary shares sold by owners including founder and controller Janguie Diniz. The issuer focused on Brazil’s rapidly growing North and Northeast is raising funds for acquisitions and organic growth. BTG Pactual, Credit Suisse, Goldman Sachs and Santander are managing. Peer Anima Educacao, targeting a BRL500m IPO, is to follow next week. Even if the Ser deal stands, the price level is not good news for fellow Brazilian issuers hoping to get out the door before 2014, notably travel agency CVC, which has re-filed for an attempt at an IPO. “Brazil is still the same game, the smaller the deal the more challenging it is,” says a Brazil-based ECM banker, noting that the same difficulties remain as in 2011 and 2012 – international investors need size and bankers don’t give their clients realistic price targets. Next year, he expects activity to be compressed into 1H 2014, due to the World Cup and elections. Brazilians have raised $12.64bn in the ECM so far this year from 30 transactions, including Ser, according to Dealogic data, with $5.74bn coming from the BB Seguridade IPO alone. This is out of a $33.98bn LatAm total from 7