Tag Archives: IPO

Petrobras to raise up to US$ 2.3 Billion in IPO of it’s distribution subsidiary

BR Distribuidora, distribution arm of Petrobras (PBR), started yesterday the process that should be the largest IPO since 2013 in Brazil. With the sale of a maximum of 33.75% of its stake in BR, the parent company Petrobras may raise up to R$ 7.5 billion (US$ 2.3 Bi), an important figure for its divestment plan. This estimate takes into account the placement of all lots for sale and the ceiling of the indicative range of price per share, which ranges from R$ 15 to R$ 19, according to the prospectus released yesterday. In the pessimistic scenario, Petrobras would raise R$ 4.4 billion by selling 25% of the shares.

Considering the stock price range disclosed, BR should arrive on the stock exchange on December 15th , with a market cap between R$ 17.5 billion and R$ 22.1 billion (US$ 5.4 bi and 6.7 bi). Despite the expressive absolute valuation, it has a discount ranging from 26% to 40% against the trading multiples of one of its main competitors, Ultrapar, owner of the Ipiranga distribution network.

According to market sources, what explains the discount is the fact that, despite the governance safeguards included in its statute – such as the requirement that half of the directors be independent – the company will remain a state-owned company and, therefore, subject to political interference.

The perception in the market is that BR’s offer will not have demand issues. The question will be the price, to be officially set on December 13. While local managers will bargain discount, but should stay out, foreign investors have already given signs of interest. Because of the discount size offered relative to its peers, BR expects to attract enough demand to close the price between the middle and the ceiling of the range.

Adding the expected market cap range to the net debt of R$ 3.86 billion in September, BR should have company valuation between R$ 21.3 billion and R$ 26 billion. This concept of company valuation assumes that the company’s future cash flow will be shared between its shareholders and creditors.

When dividing this amount by BR’s adjusted profit before interest, taxes, depreciation and amortization (Ebitda) in the last 12 months, which was R$ 3 billion, one arrives in multiples of 7.1 times in the floor of the prices per share, 7.9 times at the midpoint and 8.7 times at the peak.

On yesterday’s trading session, Ultrapar’s shares traded at a multiple of 11.8 times its Ebitda in the last 12 months, hence the discount. Ipiranga represents 75% of the consolidated Ebitda of Ultrapar, which is a holding company.

Funding of Brazilian companies with debt and equity jumps to R$ 192 billion (US$ 60 bi)

The wind begins to shift to the capital market in the wake of falling interest rates to near historic lows and the contraction of bank credit after two years of deep recession. Since last year, the favorable environment has opened space and consolidates a trend of strong growth for corporate debt issues, along with capital openings and subsequent stock offers, which increasingly assume a major role as a source of financing for large companies .
Between January and September, data from the Brazilian Association of Financial and Capital Market Entities (Anbima) shows that the issuance of fixed income securities in Brazil and abroad by companies plus funding through variable income in the country reached R$ 176.3 billion, or three and a half times the volume of R$ 49.9 billion granted by BNDES in the same period, according to figures from the state bank itself.

For Sergio Goldstein, chairman of Anbima’s corporate finance committee, the expansion is expected to continue in 2018: “the economy probably accelerates next year and thus there’s no way the capital market does not come along.”

A singularly favorable situation fuels this movement of greater participation of the capital market as a source of funds: falling interest rates and prospects that it will remain close to historical lows for a prolonged period, low inflation, growth, albeit gradual, and a change in the policy of subsidized rates by the BNDES.

JBS Announces That Its Subsidiary JBS Foods Plans to Conduct a Registered IPO In the U.S.

JBS S.A. (“JBS” or the “Company”), in a further step towards advancing its planned reorganization, announces that its Board of Directors today unanimously approved the filing of a registration statement with the U.S. Securities and Exchange Commission (“SEC”) of its subsidiary JBS Foods International B.V. (which shall be converted into JBS Foods International N.V.) (“JBSFI”) in connection with its plan to conduct an initial public offering (“IPO”) on the New York Stock Exchange (“NYSE”) for its Class A common shares.JBSFI has its official seat and registered office address in The Netherlands and shall house all of the international businesses of JBS plus Seara. JBS S.A. will continue to manage and control the Brazilian beef business and related activities including leather processing.

Wesley Mendonça Batista will be the Chairman, a non-executive director, of JBS Foods International. The Board of Directors of JBSFI will be composed of nine members, the majority of whom will be independent. Gilberto Tomazoni, who has held senior executive positions at JBS for the past four years, will be the CEO, while Russ Colaco will be CFO. The Company believes that this revised structure and proposed IPO reflects its global production platform, product portfolio and broad international customer base.

The Company expects to complete the IPO during the first half of 2017. The timing, number of Class A common shares and price of the proposed offering have not yet been determined.

This notice does not constitute an offer to sell or the solicitation of an offer to buy securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.

With regard to this material fact, the management of JBS S.A. will conduct a conference call with analysts and investors tomorrow, December 06, 2016 at 10:00am (BRT) in Portuguese and 12:00pm (BRT) in English

Car rental company Movida can raise up to US$ 300 million with IPO

Car rental company Movida is expected to carry out an initial IPO that could reach between R$ 800 million and R$ 1 billion, according to preliminary estimates from people close to the deal.The funds raised with the transaction, which is still pending approval by the Brazilian Securities and Exchange Commission (CVM), will be pocketed by both JSL logistics company, Movida’s parent company and the company itself.

This is the second IPO request from a vehicle rental company in Brazil this week. Two days ago, Unidas also expressed the interest of opening to the stock market.

In its third quarter financial statements, Movida reported net income of R$ 13.5 million and revenue of R$ 498.7 million. The company also had negative net working capital of R$ 607.5 million – short-term resources lower than the short-term liabilities. According to Movida, this is due to the investment plan made by the company in the opening of new units and in the expansion and renewal of the fleet.

Petrobras Plans to Raise US$ 6 Billion with Sale of its Distributor, BR Distribuidora

The sale of a slice of BR Distribuidora or attracting a private partner for the company will be the first step in Petrobras’ (PBR) asset sale plan, necessary to reduce the company’s debt level. Last night, the company officially announced this intention. The plan is to try and complete the operation this semester.

BR Distribuidora Gas StationThe state-controlled company considers the possibility of two operations: an IPO (initial public offering) and/ or to attract a partner. The IPO would promote a ‘governance shock’ in the company, which is now a wholly owned subsidiary of Petrobras. The ‘benchmark’ is Ultra Group – Ultrapar (UGP).”

BR Distribuidora is the largest distributor in the country with 7,797 gas stations. It has 36.9% of the fuel market, with sales of R$ 121.7 billion and profit of R$ 1.1 billion in 2014. Ultrapar, which has 7,100 stations, sold R$ 69.7 billion and had a profit of R$ 1.2 billion.

Using the market value of Ultrapar as a reference – today, around 12 times its cash generation (EBITDA) – it is possible to estimate that BR can be worth close to R$ 40 billion. In theory, to sell half of the shares, Petrobras would raise R$ 20 billion (aprox. US 6 billion) However, because it is state owned, investors may demand a reduction in multiples.

In the announced business plan for 2015/2019, Petrobras set a realistic target of increasing oil production – from 2.8 million barrels per day to 4.2 million in 2020. The next step was to announce an ambitious assets sales plan, US$ 58 billion in four years. “We will combine realistic production goal with sale of assets, attract partners, reduce costs and a better way of doing things. We forced this situation on purpose and the announcement about BR is the first major move in that direction”, he said. In the model to attract partners, Petrobras plans to have different partners in different parts of the business.

Pão de Açúcar and Casino Create a Giant Global E-Commerce Company: Cnova

Grupo Pão de Açúcar (aka Companhia Brasileira de Distribuição – CBD), Via Varejo (VVAR11:BR) and French group Casino Casino Guichard-Perrachon (OTC:CGUIF) (OTCPK:CGUSY) have announced a joint venture to create a giant new e-commerce company: Cnova.

CBD and Via Varejo will own 53.5% of the new company, while the remaining 46.5% will belong to Grupo Casino. The French group has already filled for an IPO of the new company in the US.

Cnova is born as one of the largest e-commerce companies in the world, with a volume of goods  nearly US$5 billion, based on data from 2013. The company will have a large presence in France, Colombia, Thailand and Vietnam through the Cdiscount websites, besides Brazil, with Extra.com, CasasBahia.com and Pontofrio.com, sites operated by Nova Pontocom, a company owned mainly by CBD and Via Varejo.

According to the companies’ release, the success of Cnova will be based on a business model of low cost operations, attractive prices, a wide variety of products and delivery solutions and highly differentiated payment.

Cnova will have two co-presidents, and one will probably be the current president of the Nova Pontocom, Germán Quiroga Pasquale, while the other will be the president of Cdiscount.

Moreover, the company’s board will consist of 9 members, 3 appointed by Casino, including Jean-Charles Naouri – president of Casino and who will be the chairman -, 2 members shall be appointed by Pão de Açúcar, 1 by Via Varejo, while the other two members will be independent. Finally, the two co-presidents will switch in the position that remains on the board.

While the news is positive in general, Via Varejo, the brick-and-mortar side of CBD, may end up with the worst part of it. If Cnova gets the same buying power that Via Varejo has and transfer this benefit to the end consumer, there may be serious cannibalization of the physical stores from Via Varejo. Casino has reportedly always wanted to do an IPO of its global operation with the intent of extracting value from Nova.com, the online arm of CBD, which Casino partly owns.

In 2013, Nova.com had a revenue of BRL 4.8 Billion (approximately US$ 2 Bi) versus BRL 25 Billion from Via Varejo. This number could change drastically in the mid to long term, which would be neutral for Casino and CBD but negative for Via Varejo.

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