--Brazil saw only four initial public offerings in 2012
--Expected economic rebound bodes well for 2013 performance
--Foreign investor appetite seen as keen ahead of rebound
By Rogerio Jelmayer and Luciana Magalhaes
SAO PAULO--Brazilian companies are likely to witness a recovery
in the volume of initial public offerings of stock this year, due
to an expected economic rebound and the return of foreign
investors' appetite.
After two years of relatively somnolent performance, the volume
of IPOs in Brazil could even recover the robust level last seen in
2009, according to investment bankers and analysts. Volume that
year was 23.83 billion Brazilian reais ($11.7 billion).
"We are entering 2013 with less volatility in the equities
market than we saw in 2011 and 2012," said Fabio Nazari, head of
equity capital markets at investment bank BTG Pactual Group. "In
addition, international investors are looking for better returns
and are willing to assume higher risks. This is another factor
likely to prompt more equities activity this year."
Mr. Nazari expects a total of around $11 billion in IPOs by
Brazilian companies in 2013.
By comparison, last year, there were just four IPOs, totaling
BRL5.68 billion.
Foreign investors are already showing their interest in
Brazilian assets. According to Brazil's central bank data released
Wednesday, net U.S. dollar inflows on the investment side for the
period Jan. 1-11 totaled $2.31 billion. By contrast, net investment
inflows for the entire calendar year of 2012 were only $8.4
billion.
"It's a promising market," said Marcio Guedes, a director of the
Brazilian Association of Financial and Capital Market Institutions,
or Anbima. "With interest rates lower, investors are obliged to
look at investment alternatives."
After a long central bank campaign to cut interest rates,
Brazil's Selic base rate now stands at an all-time low of 7.25%,
down from its 2011 peak of 12.5%.
Economists believe Brazil is headed for a rebound in 2013,
supported by lower interest rates and a series of government tax
incentives. According to this week's Brazilian Central Bank survey
of economists and financial market analysts, the economy should
expand 3.2% in 2013, up from estimated growth of only 1.0% in
2012.
This year is likely to be marked by some big IPOs.
Brazilian state-run Banco do Brasil S.A. (BDORY, BBAS3.BR) is
looking to raise around BRL5 billion in 2013 from the spinoff of
its pension and insurance unit, called BB Seguridade SA, according
to two people with knowledge of the transaction. A spokesman for
Banco do Brasil declined to comment for this article.
The bank first revealed its plans to take BB Seguridade public
in November, saying it would allow the business to grow faster by
taking it out from under the shadow of the far larger traditional
banking operation.
If the deal does go through, it would likely be the largest IPO
in Brazil since October 2009, when Banco Santander Brasil SA (BSBR,
SANB11.BR, SANB3.BR, SANB4.BR), the Brazilian unit of Spanish bank
Banco Santander SA (SAN, SAN.MC), raised BRL13.2 billion from its
IPO.
Meanwhile, giant Brazilian cement company Votorantim Cimentos
has hired several banks to coordinate an IPO that could amount to
BRL6 billion, according to two bankers close to the matter.
However, Votorantim, in an emailed statement last week, said "a
share offer is not part of the company's current plan."
Other companies such as Brazilian airline Azul Linhas Aereas and
Brazil's largest travel agency, CVC Brasil, may also tap the
equities market this year, according to market sources.
Currently, three companies have signaled their intention to hold
IPOs through registrations with the Brazilian Securities
Commission. A fourth company, Vix Logistica SA, registered for an
IPO but later withdrew its application, citing uncertain market
conditions.
The market may attract small players too.
According to Andre Viola Ferreira, a partner at Ernst &
Young Terco, Brazil currently has fewer than 400 publicly traded
companies, far fewer than other stock markets. China has some 4,000
and India 7,000, according to the Brazilian Association of Publicly
Traded Companies, or Abrasca.
Brazil's sole financial exchange, the BM&FBovespa
(BVMF3.BR), expects "a big wave" of IPOs over the next two years,
especially from small and mid-sized companies.
"The next two years are going to be a watershed," said the head
of the exchange, Edemir Pinto, in a recent interview. "We are
seeking, and we expect to obtain, the cooperation of government
regulators to make it easier for smaller companies to list on the
exchange. There is a huge potential."
A group of Brazilian entities, including the securities
commission and BM&FBovespa, have put together a technical
committee that will propose initiatives in that direction.
The results of their study, to be delivered by March, will guide
the government in efforts to make it easier for small and mid-cap
companies to list on the exchange via share offers in the range of
BRL50 million to BRL100 million.
Historically, international investors account for 70% of IPO
volume in Brazil. They tend to participate in operations above
BRL500 million. Most foreign investors in this segment are asset
management or pension funds.
Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com
Write to Luciana Magalhaes at luciana.magalhaes@dowjones.com
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