Linx, a provider of software to the retail market, is likely to be the first company to try to launch an IPO in Brazil in 2013. The deal will be eagerly watched by all equity market participants: the market badly needs a successful first transaction to build momentum after a terrible year for IPOs in 2012. There is a reported backlog of at least 40 companies with serious IPO intentions and bankers say they have high hopes for a large volume of equity to be issued in the market, even if most say the second half of the year should be the more active.
Linx’s IPO would be the first in the country since furniture maker Unicasa priced a July deal below its expected range. Of the only other two IPOs last year, BTG Pactual managed to price in the middle of the range with its atypical transaction and car rental company Locamerica failed to hit its range.
The Brazilian IT company is targeting a pricing date of February 6 to sell 19.6 million shares (assuming a 15% greenshoe) at between R$23 and $27. At the mid-point of the range the company would raise R$490 million ($240 million) and the sale includes 6 million secondary shares going to a private equity fund with links to Itaú, one of the deal’s managers (the others are BTG Pactual, Credit Suisse and Morgan Stanley).
The deal ticks a number of boxes for investors: the company straddles the IT and retail sectors and therefore is exposed to the consumer story in Brazil, which is appealing. The company also plans to use the proceeds to invest in what it believes are strong growth prospects. The only superficial weakness – especially for international investors – is the small scale of the IPO.
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