Latin Finance - September/October 2009 - 34

Brazil equity on consumer and growth stories and the arrival of new cross-over investors will be the peg for Brazilian IPOs, believes Wainstein. That theme has already played out with the pork and poultry giant Brasil Foods, which raised 5.29 billion reais July 21. Brasil Foods is the name adopted by Perdigão, which aims to take over rival Sadia for 1.4 billion reais and assumption of debts. The anti-trust body, Cade, is investigating the take-over but allowed the equity deal to go ahead anyway. The price per share was set at 40 reais, a tight discount to the previous night’s trading price of 40.59 reais. Subsequently, the controlling shareholders of cosmetics company Natura raised 1.3 billion reais through a secondary offering July 31 with shares pricing at 26.50 reais, a slim discount to the 26.85 the shares were trading at the night before. One senior banker on the VisaNet deal notes that 20% of demand for came from investors who were making a first foray into Brazil. Some 75% of the shares were snapped up by foreigners, in line with the buying pattern seen during the earlier wave of IPOs, he adds. While dedicated emerging market investors dominated buying in the 2004-2007 boom, crossover investors, who had Clear and Present Risk paid only superficial attention to Brazil, are arriving in force. The regulatory risk embedded in VisaNet became more They tend to price more accurately than global accounts, as obvious as the deal progressed, says Morse. Global investors they have excellent knowledge of an industry and tend to hold thought credit card companies would be able to maintain cash positions for a longer time, says Wainstein. generation, and as a growth story, the company was appealing, The Brazil equity pipeline will include a number of Morse notes. However, the risks were clear from the start and infrastructure stories, says Cunha. High interest rates have the issue dominated Schroder’s one-on-one meeting with until recently deterred the launch of such long-term projects. company management, he says. He declines to state whether The drop in rates makes deals feasible and projects ready prior he participated in the IPO, citing company policy. to the crisis will look for an opportunity to come to market, Regulatory risk was stated in the prospectus and not felt Cunha adds. The ethanol sector has lots of demand for capital to be a high probability, says a senior São Paulo-based banker. although it needs to put more order in its business models, Moreover, there will be few further opportunities to buy into he believes. Cunha expects 10-20 relatively large liquid deals the credit card story in Brazil. “How many VisaNets are out including infrastructure and further consumer stories in the there?” says the banker. second half of 2009. A deal for power company Light in July brought in 707 The equity market is open across sectors for strong million reais through the sale of a slug of 29.5 million shares, companies with interesting growth prospects and good with 16.1 million shares sold by BNDESPar and France’s EDF management although there is much more price sensitivity, divesting the balance, representing its entire stake. The offer says Olympio. Pricing follow-ons is more difficult and size was bumped up by more than 20%. Itaú BBA and Citi investment banks need to create strong momentum, he notes. placed the transaction at a discount of 4.12%. Olympio views infrastructure and agroindustry as key The Light story was sold as a defensive play and the stock sectors for Brazil. Private equity will remain the leading see-sawed in the run up, falling 5% in one day shortly before alternative for investments of up to $100 million, as public placement, bankers say. One senior investment banker off the market participants are reluctant to participate in illiquid deals, issue adds that the Light deal has been in the making for well he notes. This marks a significant departure from the end of the over a year, with shareholders biding their time for a window last boom, when small and mid-sized IPOs had a major impact. to launch. Wainstein agrees that Brazilian companies will need strong Morse accepts the reasons for the Light placement as justification for placing shares. “Investors are more selective development bank shareholder BNDES looks to raise cash to and not every company is going to be able to come to market. fund its investment portfolio in the downturn. He wonders, That should lead to consolidation in key sectors as only the however, about its attractiveness partly thanks to concerns strongest thrive,” he says. about the liquidity of the company’s stock. Morse also sees investors emphasizing growth and M&A. Ambitious or cash-strapped companies in sectors that are Enter Mature Buyers fragmented will target the market, although deal liquidity is The theme of consumer stocks is prevalent today. The emphasis going to be a hurdle, he reckons. LF 12% to 16.78 reais on the first day of trading and closed at 17.61 reais July 30. Bankers on the deal see it as a bet on the Brazil consumer story, claiming also that VisaNet may be the last opportunity for some time in a sector with little competition. The company is in a duopoly with high barriers to entry, exclusively leveraged to Brazil, and has strong sponsorship. There is also size and liquidity in the deal, adds Olympio. The story played well with investors seeking exposure to consumers in higher growth markets, adds a senior investment banker away from the deal. However, investors worry that the roadshow for VisaNet downplayed looming regulatory risk. A report earlier this year from the central bank discusses the duopoly in the business based on exclusivity rights and highlights an inefficient fee structure. That was dealt with in the prospectus, but glossed over in presentations, says Cunha. “It scares me that IPOs need to come in these waves and fashions,” Cunha says, referring to the tendency of deals to come bunched – as was the case in the last wave of IPOs – with clusters of deals in sectors including real estate and small and mid-cap banking. 34 LatinFinance September/October 2009

Latin Finance - September/October 2009

Table of Contents for the Digital Edition of Latin Finance - September/October 2009

Latin Finance - September/October 2009
Contents
Investment Banking Survey
Who Said That?
OTPP Investment Strategy
Central Bank Scorecards
Brazil Liability Management
Real Estate Equity Resurrected
Structured Finance Forecasts
Grim Outlook. Reform Required
Banorte Seeks to Grow
Peru Spending Hits a Block
BCP Sees Better Days
Caribbean Investment Report
Sustainable Banking
Legal Services Survey
Parting Shot
Latin Finance - September/October 2009 - Latin Finance - September/October 2009
Latin Finance - September/October 2009 - Cover2
Latin Finance - September/October 2009 - Contents
Latin Finance - September/October 2009 - 2
Latin Finance - September/October 2009 - 3
Latin Finance - September/October 2009 - 4
Latin Finance - September/October 2009 - 5
Latin Finance - September/October 2009 - 6
Latin Finance - September/October 2009 - 7
Latin Finance - September/October 2009 - 8
Latin Finance - September/October 2009 - 9
Latin Finance - September/October 2009 - 10
Latin Finance - September/October 2009 - 11
Latin Finance - September/October 2009 - 12
Latin Finance - September/October 2009 - 13
Latin Finance - September/October 2009 - Investment Banking Survey
Latin Finance - September/October 2009 - Who Said That?
Latin Finance - September/October 2009 - 16
Latin Finance - September/October 2009 - 17
Latin Finance - September/October 2009 - 18
Latin Finance - September/October 2009 - 19
Latin Finance - September/October 2009 - 20
Latin Finance - September/October 2009 - 21
Latin Finance - September/October 2009 - 22
Latin Finance - September/October 2009 - OTPP Investment Strategy
Latin Finance - September/October 2009 - 24
Latin Finance - September/October 2009 - 25
Latin Finance - September/October 2009 - Central Bank Scorecards
Latin Finance - September/October 2009 - 27
Latin Finance - September/October 2009 - 28
Latin Finance - September/October 2009 - Brazil Liability Management
Latin Finance - September/October 2009 - Real Estate Equity Resurrected
Latin Finance - September/October 2009 - 31
Latin Finance - September/October 2009 - 32
Latin Finance - September/October 2009 - 33
Latin Finance - September/October 2009 - 34
Latin Finance - September/October 2009 - 35
Latin Finance - September/October 2009 - 36
Latin Finance - September/October 2009 - Structured Finance Forecasts
Latin Finance - September/October 2009 - 38
Latin Finance - September/October 2009 - Grim Outlook. Reform Required
Latin Finance - September/October 2009 - 40
Latin Finance - September/October 2009 - 41
Latin Finance - September/October 2009 - 42
Latin Finance - September/October 2009 - 43
Latin Finance - September/October 2009 - 44
Latin Finance - September/October 2009 - Banorte Seeks to Grow
Latin Finance - September/October 2009 - Peru Spending Hits a Block
Latin Finance - September/October 2009 - 47
Latin Finance - September/October 2009 - 48
Latin Finance - September/October 2009 - 49
Latin Finance - September/October 2009 - BCP Sees Better Days
Latin Finance - September/October 2009 - 51
Latin Finance - September/October 2009 - 52
Latin Finance - September/October 2009 - 53
Latin Finance - September/October 2009 - 54
Latin Finance - September/October 2009 - Caribbean Investment Report
Latin Finance - September/October 2009 - 56
Latin Finance - September/October 2009 - 57
Latin Finance - September/October 2009 - 58
Latin Finance - September/October 2009 - 59
Latin Finance - September/October 2009 - 60
Latin Finance - September/October 2009 - 61
Latin Finance - September/October 2009 - 62
Latin Finance - September/October 2009 - 63
Latin Finance - September/October 2009 - 64
Latin Finance - September/October 2009 - 65
Latin Finance - September/October 2009 - 66
Latin Finance - September/October 2009 - Sustainable Banking
Latin Finance - September/October 2009 - 68
Latin Finance - September/October 2009 - Legal Services Survey
Latin Finance - September/October 2009 - 70
Latin Finance - September/October 2009 - 71
Latin Finance - September/October 2009 - 72
Latin Finance - September/October 2009 - 73
Latin Finance - September/October 2009 - 74
Latin Finance - September/October 2009 - 75
Latin Finance - September/October 2009 - 76
Latin Finance - September/October 2009 - 77
Latin Finance - September/October 2009 - 78
Latin Finance - September/October 2009 - Parting Shot
Latin Finance - September/October 2009 - 80
Latin Finance - September/October 2009 - Cover3
Latin Finance - September/October 2009 - Cover4
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