Discover Thomson Reuters
By Guillermo Parra-Bernal
4 Min Read
* Retailer raises 925.8 mln reais in share sale debut
* Prices shares at 16 reais each, at bottom of range
* Proceeds to fund acquisitions, store remodeling (Adds background on company CEO, operational metrics in paragraphs 10-16)
SAO PAULO, April 28 (Reuters) – Brazilian appliance retailer Magazine Luiza and shareholders on Thursday raised 925.8 million reais ($586 million) in an initial public offering to finance acquisitions and store remodeling.
Magazine Luiza and shareholders including buyout firm Capital International sold a total 57.9 million shares at a price of 16 each, according to a securities filing. The number includes the additional lot of stock offered to investors and banks participating as advisors in the deal.
The transaction priced at the bottom of the range of 16 reais to 21 reais proposed by the company on April 7, valuing the nation’s third biggest home appliance retailer at 3.18 billion reais.
The deal comes as other IPOs this year have failed to lure interest from foreign investors — traditionally the main buyers of new equity listings in Brazil — because of growing risk aversion and a perceived glut of shares in local markets.
The investment-banking units of securities firm BTG Pactual [BTG.UL], Itau Unibanco ITUB4.SA and Banco do Brasil BBAS3.SA advised Magazine Luiza on the transaction.
The retailer, based in the rural town of Franca in Sao Paulo state, has lagged behind rivals in targeting potential acquisitions amid a wave of consolidation in Brazil’s burgeoning home appliance market.
Rivals are merging to win market share more rapidly, negotiate better prices with suppliers and expand in regions outside the traditional axis of Sao Paulo and Rio de Janeiro.
Proceeds from the transaction will be used to fund operations, buy rivals and invest in technology and store remodeling, according to investors briefed by Magazine Luiza executives in recent meetings.
Shares are set to begin trading on the Sao Paulo stock exchange on May 2 under the symbol “MGLU3.”
Those investors told Reuters ahead of the pricing that difficulties in calculating Magazine Luiza’s debt load could hurt the pricing. Concern that Chief Executive Luiza Trajano may press too hard to buy rivals at a time when the government is seeking to slow down consumption could affect sentiment, they also noted at the time.
According to estimates by Banco Fator analyst Renato Prado, debt was the equivalent of 1.3 times the company’s operational earnings at the end of last year.
Late in 2009, Grupo Pao de Acucar PCAR5.SA, the country’s biggest retailer, announced the takeover of rival Casas Bahia in an asset swap that created a giant with $31 billion in annual sales.
Rivals Insinuante and Ricardo Eletro also agreed to merge last year, creating the No. 2 appliance retailer to tap into surging demand for TV sets, refrigerators and other consumer goods. The combined company, known as Maquina de Vendas, is considering going public next year.
Trajano, a folksy figure who gives inspirational speeches around Brazil, personally promoted the share offering in television commercials in recent weeks.
Before the IPO, the Trajano family controlled 75.4 percent of Magazine Luiza through their investment holding company LTD Participacoes. Capital International held about 13 percent.
Magazine Luiza currently has 604 stores and operates online and mega-store formats. Trajano wants to expand in 240 mid-sized cities across Brazil that could offer potential for new sales.
Sales rose 43 percent to 4.8 billion reais last year. Same store sales, or sales in stores open for more than a year, rose 25 percent in 2010.
Magazine Luiza calculated its net debt at 400 million reais at the end of December. ($1=1.58 reais) (Additional reporting by Vivian Pereira in Sao Paulo; Editing by Carol Bishopric)
Our Standards: The Thomson Reuters Trust Principles.
All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.

source