Equity, debt offerings regain momentum, heralding dynamic period for companies
Cristiano Guimarães — Foto: Gabriel Reis/Valor
If the first months of 2023 were marked by uncertainties, especially about the direction of the economy – the country’s and the world’s – and what the third Lula administration would be like, the expectation for next year, for now, seems less cloudy and of resumption of business. “What we can say is that 2024 will be the year of IPOs,” said Cristiano Guimarães, head of Itaú BBA’s corporate and investment bank, in an interview with Valor.
The moment represents a rapid turnaround. At the beginning of the year, after the trauma of the corporate events coupled with an environment of very high interest rates and no forecast of the beginning of a fall, a question asking for forecasts for the capital market in Brazil could bring a disappointing answer to the interlocutor. One would not dare to imagine how fast the recovery would be. However, the stock market accelerated and picked up speed. In fixed income, both domestic and foreign, companies started to access capital again. Foreigners, who have been more distant, have returned to allocate and have increased exposure.
At Itaú BBA, which ranked first in the first half of the year in terms of revenues from commissions, according to the consulting firm Dealogic, the good news will continue to move the market, which is already more active.
And all this change has been reflected in the very profile of the operations. In the stock offerings, for example, back in April, after months of no transactions, the healthcare companies Dasa and Hapvida went to market because of the need to adjust their financial statements, in their secondary offerings, needed the contribution of their controllers.
“Now operations have changed their profile and companies have already started to look at investments,” said Mr. Guimarães. The expectation is that the period of almost two consecutive years without an IPO – which has not happened in at least 25 years – will end.
Among the offerings with this new face are the car rental chain Localiza, in an operation that involved R$4.5 billion, and MRV, with another R$1 billion – another primary offering, that is, that injected money into the company’s cash. Without taking into account the offer of the distributor of hospital products Viveo and Copel, a transaction that will culminate in the privatization of the Paraná power utility, the financial volume of operations in 2023 already amounts to R$22.3 billion, practically the same value as the entire year of 2022 – if the Eletrobras offer is excluded from the calculation, which distorts the comparison.
According to the Itaú BBA executive, it was foreigners who felt the change in the atmosphere more quickly, something that was felt at a conference with the bank’s executives and managers in New York in mid-May. Positive news, such as inflation data, a more optimistic view of economic growth, the approval of the fiscal framework, and also the tax overhaul passed by the National Congress. All this has already been reflected in the performance of the stock market, which has risen by around 20% since its low point in March.
The perception of an improving environment has also been shown by the rating agencies, an important barometer for investors to start directing more capital flows to Brazil. “The Fitch upgrade enhances the positive momentum for the Brazilian capital market. The number of fixed income and equities offerings will benefit from this favorable scenario,” said Mr. Guimarães.
As the fixed and variable income markets began to open up, so did mergers and acquisitions. In addition to access to financing, a prerequisite for this type of operation is greater optimism on the part of negotiators. “There is a greater willingness to make deals,” said Roderick Greenlees, global head of Itaú BBA’s investment bank.
Recent examples of recently announced transactions in which Itaú was one of the advisors include the merger of regional internet operators Vero and Americanet, and the purchase of Brazil’s Rio Energy, in the renewable energy sector, by Norway’s Equinor.
In the year to date, the volume of M&A operations, considering only those involving financial advisors, has reached R$85.9 billion, which is 36% below the same period last year. By the end of the year, Mr. Greenlees predicts that there will be some acceleration in activity, with a financial volume between R$150 billion and R$200 billion.
As for equity offerings, even without the IPOs yet, the public offerings will continue to follow after a rather tepid start to the year that left investment banking activity lower than expected in the first quarter. With 15 offerings so far — 17 in addition to the two already launched but not priced — it is estimated a total of between 25 and 35 offerings by the end of 2023.
In the local bond market, issuances totaled R$195 billion last year, also reflecting the companies’ decision to advance issuances given market conditions, said Felipe Wilberg, head of fixed income and structured products at Itaú BBA. For this year, local emissions should be between R$100 billion and R$110 billion, he said.
*Por Fernanda Guimarães, Mônica Scaramuzzo — São Paulo
Source: Valor International