Home Business Goldman and Morgan Stanley Lead Stock Offers in Brazil

Goldman and Morgan Stanley Lead Stock Offers in Brazil



The $ 3.7 bln in stock sold by PagSeguro this year put Morgan Stanley and Goldman Sachs in the top two places in the ranking of Brazilian stock offering coordinators in the first half of the year, one of the rare occasions when US banks the local market.

“This is an interesting year, because although there are not many transactions, they are emblematic,” said Antonio Pereira, head of Goldman Sachs’ investment bank in Brazil, in an interview in São Paulo. “The discussion now has more to do with the quality of the company offered to investors than with the macro risk of Brazil.”

The two Wall Street giants have PagSeguro Digital to thank for the victory, after the payment company chose them to help sell $ 2.6bn in January, the New York Stock Exchange’s biggest offering since March 2017. Stocks rose after its debut and PagSeguro took the chance to sell another $ 1.1bn in stocks in June. Goldman Sachs and Morgan Stanley were the primary underwriters in both transactions.

From the IPS of PagSeguro until now, the scenario has complicated for those who want to sell shares in the stock exchange. Asset prices in Brazil have been under pressure following the truckers strike that paralyzed the country for 11 days in May and raised concerns about the October presidential election, where pro-market candidates have been losing ground. Currently leading the research is Jair Bolsonaro, seen as unpredictable, followed by Ciro Gomes, who embraced some unorthodox economic views.

The election “is certainly a relevant factor and has become even more important over the past month,” as it creates volatility, said Alessandro Zema, head of investment banking in Brazil at Morgan Stanley, in an interview.

Economic and political uncertainty has shaken the plans of some Brazilian companies to become public. Of the 13 that have indicated intention to issue shares for the first time in the Brazilian stock market this year, only three have so far achieved: the health plan operators Hapvida Participações e Investimentos and Notre Dame Intermedica Participações and Banco Inter. Other companies, including toy retailer Ri Happy Toys, from the Carlyle fund, and digital lender Banco Agibank, have given up.

“I think it fair to say that the level of activity for IPOs and secondary offers will decline significantly until the elections,” Zema said. “If we start to have a positive news flow, we can see the actions having a rally and the business starting to gain strength.”

The volume credited to Morgan Stanley was $ 4.6bn through July 20, followed by Goldman Sachs’ $ 4.3bn, according to data compiled by Bloomberg. Brazilian companies issued a total of R $ 24.4 billion in shares, an increase of 1% over the same period in 2017. Still, the number of transactions fell from 21 to 16.

Last year’s leader was Banco Itaú BBA, who also held that position in 2016. A local bank has been at the top since 2010.

Block Trades

The Ibovespa, which fell to the lowest level of the year after the truckers’ strike, now rises 3% a year. The recovery fueled the bankers’ hopes that at least one type of stock deal could break the lull in the election year: block trades.

These transactions “are fast-tracked and can generate good earnings depending on market conditions,” said Fabio Nazari, head of capital markets and a partner at Banco BTG Pactual, who worked on the largest number of deals this year in Latin America. Block sales are most likely when companies are trading near the highest historical levels, and the recent market recovery has increased the chances that some sellers will decide to enter the market before the end of the year, Nazari said.

‘Avalanche’ of transactions

Among the block trades of this year were the sale of R $ 1.41 billion from Mitsubishi UFJ Financial Group of about half of the stake in Bradesco, the sale of Shell’s stake of R $ 709 million in Cosan and the sale of about R $ 530 million from the state of Rio Grande do Sul in shares of Banrisul.

“If the election result is positive, I think it will be an avalanche of agreements,” Nazari said. “Let’s see a three-year bonanza.”

Goldman Sachs is already eyeing post-election transactions, Pereira said, as the bank plans to be a more regular presence in the region’s stock rankings.

“Brazil is now on a growth path, so we resized our team to fill the coverage gaps we had,” said Pereira, adding that the bank now has about 40 people in its investment banking unit, compared to 30 in the area until recently. Among the new hires are Ricardo Bellissi, former chief of mergers and acquisitions of Santander Brasil and João Lobo, former director of investment bank of Citigroup, said this month people familiar with the matter.