| SAO PAULO
SAO PAULO Feb 10 Brazil's busiest week for
initial public offerings in nearly four years ended on Friday
with mixed results for issuers, faced with wariness among
foreign investors toward Latin America's largest equity market
amid fallout from political turmoil.
Rent-a-car Movida Participações SA and medical laboratory
Instituto Hermes Pardini SA concluded their IPOs despite
pressure for lower prices. Movida's rival Unidas SA, however,
halted its IPO plans on Friday, four people directly involved in
the deals said.
Aside from overlapping IPOs between the rental car rivals,
the pricing of a large 4.1 billion reais ($1.3 billion)
follow-on offering by CCR SA, Brazil's largest toll
road operator, might have hampered demand for the offerings, the
This week was the busiest for domestic equity offerings
since April 2013, when three large listings were priced.
Investors stung by a string of deals in recent years that
failed to deliver promised returns have become cautious about
IPOs in Brazil.
Only about a third of the 138 IPOs priced over the past
decade yielded returns above the benchmark interbank lending
rate, Thomson Reuters data showed, with the remainder losing
part or all of the amount initially invested.
Movida's shares, which plunged on Wednesday - their first
day of trading - have since recovered and appear headed toward
notching a 2 percent gain on the week.
Extending the current wave of offerings and providing
cheaper funding for companies hinges on President Michel Temer's
ability to push ahead with ambitious reforms to lower the
country's risk perception, bankers said.
"This week showed we are still in a buyers' market and
investors still feel more comfortable taking existing risk than
new one," said one of the people, who asked for anonymity to
speak about the transactions.
Stronger equity markets and companies' need to fund growth
or reduce debt are the "fundamental catalysts in place"
sustaining IPO activity in Brazil and Latin America this year,
according to Pedro Martins, chief Latin America equity
strategist for JPMorgan Securities.
However, companies seeking to tap the local equity markets
face a balancing act: how to offer acceptable risk and return as
Brazil enters a third straight year of economic recession,
political risks remain elevated and global trade protectionism
gains steam under U.S. President Donald Trump, bankers said.
Such uncertainty is keeping foreign investors -
traditionally the largest buyers of Brazilian IPOs - on the
sidelines. Foreigners snapped up only 15 percent of the Pardini
deal, a fraction of the 67 percent participation ratio they had
about a decade ago, the people said.
The mixed results of this week's IPOs may shed light on how
a list of long-awaited listings should come to market. Those
companies include airline Azul Linhas Aéreas Brasileiras SA,
securities firm XP Investimentos SA and the Brazilian unit of
France's Carrefour SA.
A new wave of IPO requests should resume in late March or
early April and stretch for longer should market conditions
prove favorable, bankers at Itaú BBA SA and Banco Bradesco BBI
SA, the country's largest equity underwriters, recently told
Movida's IPO on Monday raised a smaller-than-expected 645
million reais, after controlling shareholder JSL SA was forced
to lower the deal's pricetag. A member of JSL's controlling
family subscribed about 15 percent of the deal to ensure its
completion, sources told Reuters.
On Thursday, Hermes Pardini clinched about 1 billion reais
at a price slightly above the floor of the suggested price
range, one of the people said. At the floor of the price range,
investors bid the equivalent of three times the amount of shares
on offer, the same person said.
In the case of Unidas, shareholders Gávea Investimentos
Ltda, Vinci Partners and Kinea Investimentos Ltda shunned a
suggestion from bankers to cut the price range to secure demand
for the IPO. Banks are working on ways to help the three
shareholders divest their combined stake of about 45 percent in
Unidas, one of the people said.
($1 = 3.1145 Brazilian reais)
(Editing by Daniel Flynn and G Crosse)