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Carrefour's Brazil IPO may set the tone for IRB equity sale

Jul 18, 2017

The equity sale by the French retailer’s Brazilian unit could gauge investor demand for upcoming Brazil equity offerings

Aaron Weinman

Keywords: Carrefour IRB Brasil Re IPO Brazil equity capital markets

The initial public offering for Carrefour's Brazil unit, which is scheduled to price later Tuesday, may hold the key for the next offering in Brazil's equity pipeline from insurer IRB Brasil Re.

Early bookbuilding on the Carrefour IPO was progressing well, ECM bankers said. But some said they were still waiting on large tickets from accounts in France, the US and Brazil.

"There are still a few names pending, that will determine the pricing point," one banker said. 

A second banker said investor demand was skewed towards the lower end of the suggested pricing range, but it could increase if larger accounts come into the deal, which is expected to be one of Brazil biggest listings in years.

"There is always value at the lower end, that will be the main driver," he added.

Carrefour’s IPO on Tuesday evening is expected to raise more than BRL4bn ($1.26bn). It is also being closely watched as a potential gauge of investor interest in IRB’s secondary share sale, which is scheduled to price on July 27. 

Bookrunners have started investor meetings for the Brazilian reinsurer’s IPO. The all secondary IPO could raise up to BRL2.48bn if it prices all shares, including the overallotment, at the top of a suggested range.

Selling shareholders include BB Seguros, Bradesco Seguros and Itau Seguros, along with Itau Vida, FIP Caixa Barcelona and Fundo de Garantia de Operacoes de Credito Educativo, or FGEDUC.

Leads set a suggested range between BRL27.24 and BRL33.65 per share. The base offering comprises 63.96m secondary shares, along with an overallotment of 9.59m shares and a hot shoe for 12.79m shares.

It has been a long road to the market for IRB. The company originally planned the offering in September 2015 but postponed its plans. 

The selling shareholders hope a surge in appetite for Brazilian stocks over the past year, combined with improved operating results, will spur demand for the transaction.

IRB posted an adjusted net income of BRL225m in Q1 this year, up 12.8% on the same period in 2016, according to the company’s latest financial statements. IRB also earned BRL1.17bn in reinsurance premiums in Q1 this year, a 19.3% rise on the same period last year.

Bradesco Seguros and BB Seguros each hold 20.4% of IRB, while FGEDUC, a government fund that finances education, has a 15.76% stake, Itau Seguros 14.7%, Caixa Barcelona 9.85% and Itau Vida 0.22%. 

Bank of America Merrill Lynch, BB Investimentos, Bradesco, Brasil Plural, BTG Pactual, Itau BBA and JPMorgan are coordinating the IPO.



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