Banco Do Brasil Market Cap (as of April 26th 2013) : € 27.94 bn
BB Seguridade Market Cap (as of April 26th 2013) : € 10.91 bn

Deal size: € 3.27 bn (30% of total shares), € 3.76 bn with Greenshoe option fully exercised

On April 26th it was announced that Banco Do Brazil had sold 500 mln shares  of BB Seguridade  (about 30% of its total capital) at 17.00 brazilian reals (later BRL) per share for gross proceeds of BRL 8.5 billion (equal to € 3.272 billion), and might increase to BRL 11.5 billion if overallotment option is exercised. This IPO is a secondary offer, it has been the world’s biggest for more than six months, and defies tough market conditions on Bovespa, the Saõ Paulo Stock Exchange. The company is expected to commence trading on the 29th of April, 2013.
BB Seguridade e Participações SA is a company that offers pension, annuity and insurance services. It has a 16.5% market share of the Brazilian insurance market and operates in many other South American countries. The insurance company is an arm of Banco Do Brazil SA, which is the biggest bank in the country and is controlled by the Brazilian government, and it is worth almost half of the total market value of its parent company.
The transaction is part of a reorganization process being conducted by Banco do Brasil in order to hold all its insurance, retirement and similar activities in one company to better manage those segments of business and expand these activities in Latin America.
An interesting fact is that after the IPO was rumoured in late November 2012, Banco Do Brazil’s shares have climbed 20% while the Bovespa index declined by 4.5% during the same period. The IPO, which is the biggest since Santander Brazil’s one in 2007, comes in a market that has been very hot in the recent years, but that has been weakened by many deals that failed to deliver the promised returns. For example, Cia. De Locacao Das Americas, a Sao Paulo-based car-rental company that went public recently, priced shares 36 percent below the upper end of its target. Many other recent IPOs have been priced below the lower end of the companies’ targets, and some players decided to withdraw their public listing, a move that is not so common among the other members of the BRIC group. Economic growth has slowed to 1.9% in 2012, after it had performed a 2.7% increase in the former year.

Consequently, investors have been cautious on Brazil in the last two years. An injection of confidence may now bring to the light many investment opportunities in Brazil.
Banco Do Brazil investment bank, BB Investimentos, was the global coordinator and lead underwriter for the deal. Other institutions involved as underwriters are J.P. Morgan, Banco Bradesco, Banco Itaú, HSBC and Citigroup.


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