Foreign groups rethink Brazil listings as buyouts gather pace

Santander’s offer for minority shareholders highlights broader shift as multinational parents seek full ownership of subsidiaries amid depressed valuations

 

 

 

 

Santander’s move to acquire the roughly 10% stake in its Brazilian subsidiary that it does not already own is the latest sign that foreign multinationals are rethinking the value of keeping their Brazilian operations listed on B3. Companies including Iberdrola—the parent of Neoenergia—, Portugal’s EDP, and France’s Carrefour have taken their local subsidiaries private in recent years. Valor learned that other multinationals are also evaluating takeover bids to acquire minority-held shares in their Brazilian subsidiaries.

The trend comes amid a backdrop of high interest rates, weak market liquidity, and a dearth of new equity offerings. After the wave of initial public offerings (IPOs) in 2020 and 2021, B3 has experienced a succession of take-private transactions, mergers and takeover bids, without enough new listings to offset the departures.

B3 data show the number of listed companies fell from 394 in 2022 to 344 as of the latest survey in June. A year ago, the exchange had 361 listed companies.

“For two consecutive years, I’ve been working on takeover bids,” said Jean Marcel Arakawa, a capital markets partner at law firm Mattos Filho. According to him, controlling shareholders and prospective buyers have identified a significant gap between companies’ share prices and their intrinsic value.

“What we’ve been seeing are situations where the controlling shareholder—or even another buyer—recognizes a discount between a company’s intrinsic value and its screen price, creating room for transactions. On top of that, it has become much harder to generate additional liquidity for these shares.”

A source at an investment bank told Valor that other foreign groups are studying transactions similar to Santander’s proposal. These assessments are at different stages and may not all result in formal offers. Still, they indicate that parent companies are reassessing whether it remains strategically worthwhile to keep their Brazilian subsidiaries publicly traded.

“That makes a lot of sense, especially if the parent company’s shares trade well in its home market,” said the source, who requested anonymity. “Broadly speaking, if the parent trades at a higher P/E multiple [price-to-earnings ratio] abroad, it’s a logical move.”

In practice, when a parent company commands a higher valuation multiple in its home market than its Brazilian subsidiary does locally, it can use its own shares as acquisition currency to buy the publicly traded minority stake at a relatively lower economic cost while capturing all of the subsidiary’s future value creation. Foreign-controlled companies still listed on B3 include Telefónica Brasil, TIM Brasil, and CPFL Energia—owned by China’s State Grid. State Grid has previously announced plans to list its Brazilian operations.

In Santander’s case, the Spanish bank intends to launch a voluntary exchange offer under which minority shareholders may swap their holdings for shares in the parent company. The transaction could reach approximately R$11 billion, representing a 15% premium over the reference market price. Before the announcement, Santander Brasil units had fallen about 21% this year on B3.

The transaction does not currently constitute a take-private deal. The offer is not subject to a minimum acceptance threshold, and shareholders may choose to remain invested. Santander said it intends to keep the Brazilian subsidiary listed on B3.

A high acceptance rate, however, would significantly reduce the free float and could make a future delisting proposal easier should the parent company decide to pursue one. According to people familiar with the transaction, no such decision has been made, although market participants consider a delisting a possibility after the offer is completed.

Beyond Santander’s specific case, the move reflects a broader shift in how multinational companies view maintaining Brazilian subsidiaries on the stock exchange. For years, a local listing provided access to Brazilian investors, funding for expansion, acquisition currency, and an independent market valuation for local operations.

That rationale has weakened as Brazilian shares have traded at what many consider steep discounts and liquidity has deteriorated. With little prospect of new equity offerings, some parent companies have concluded it makes more sense to acquire minority interests and fully capture the value generated by their subsidiaries, according to a market source.

Spain’s Iberdrola was among the latest to follow that strategy. After purchasing retirement fund Previ’s 30.29% stake in Neoenergia, it launched a takeover bid for the remaining shares, raising its ownership to about 98% of the company and paving the way for its delisting from B3.

The transaction did not reduce Brazil’s strategic importance for the group. Neoenergia remains one of Iberdrola’s main international platforms, but concentrated ownership has given the parent company greater flexibility over investment decisions and corporate strategy.

Portugal’s EDP took its Brazilian subsidiary private in 2023, saying at the time that simplifying its corporate structure was part of its strategy for what it considered a priority market. In the retail sector, Carrefour acquired the remaining shares of its Brazilian operation in 2025 and became its sole shareholder, likewise emphasizing Brazil’s strategic importance to the group. In that case, the transaction was not carried out through a formal takeover bid.

The trend has also reached Brazilian groups. Last week, Randoncorp’s controlling shareholder launched a voluntary tender offer to acquire shares in the commercial vehicle equipment manufacturer, offering shares in its subsidiary Fras-le in exchange—a structure similar to Santander’s—as part of a corporate reorganization. Although the controlling shareholder is Brazilian, the transaction reinforces the broader trend toward simpler ownership structures, supported by the fact that the parent company trades at a significantly lower valuation than its subsidiary.

Other transactions have had a similar effect on Brazil’s stock market through different mechanisms. After acquiring control of Brazilian companies, shipping groups CMA CGM and MSC opted to delist Santos Brasil and Wilson Sons, respectively, choosing to operate the assets as privately held businesses.

Despite differences among the transactions, all have reduced the universe of publicly traded companies available to Brazilian investors, at a time when the market has seen virtually no new IPOs.

Henrique Filizzola, a capital markets partner at law firm Stocche Forbes Advogados, said the trend reflects a combination of strategic considerations, macroeconomic conditions, and characteristics of Brazil’s capital markets. “In many cases, the persistent discount between share prices and the intrinsic value of the underlying assets, combined with weak market liquidity, reduces the advantages of remaining publicly listed,” he said.

He also pointed to the cost of capital and the expenses associated with maintaining a listed company. “On top of that, a high-interest-rate environment increases the cost of capital and makes capital markets a less competitive source of financing, while the regulatory and corporate governance costs associated with being a publicly traded company remain high,” he said.

In his view, the trend does not reflect a loss of confidence in Brazil but rather a reassessment of the most efficient ownership structure for capital allocation and business management. The growing number of these transactions, he said, underscores the need to improve market liquidity, broaden the investor base and strengthen the Brazilian market’s ability to properly value high-quality companies.

Contacted by Valor, Santander reiterated a statement released last week saying, among other points, that the transaction “reflects Banco Santander’s confidence in Brazil and in the growth potential of its businesses in the country.” The other companies mentioned in this article declined to comment.

*By Fernanda Guimarães — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Central Bank expected to cut rates to 14%, leave door open to more easing

Inflation and economic activity data support another quarter-point cut, with policymakers expected to lower benchmark rate for a fourth consecutive meeting

 

 

 

 

The latest round of economic activity and inflation data has strengthened market confidence that the monetary easing cycle will continue, with expectations for another quarter-point cut—bringing the Selic, Brazil’s benchmark interest rate, to 14%—virtually unanimous among the 113 banks, asset managers and consultancies surveyed by Valor.

In addition to collecting forecasts, Valor interviewed economists from institutions that ranked among the Top 5 in the Central Bank’s most recent Focus survey for short-term Selic projections, covering the second quarter. While the prevailing view is that recent data and the Monetary Policy Committee’s (Copom) communication point to another cut at next Wednesday’s meeting, there’s less conviction about how long the easing cycle will last, given risks stemming from both the domestic and external outlook.

Of the 113 institutions that shared their expectations, only three don’t expect a 25-basis-point cut this week: Citi, Pantheon Macroeconomics, and Suno Research. Beyond August, 46 expect the easing cycle to end either at next month’s meeting or immediately after this week’s, while 64 expect at least one additional cut between September and December.

Barclays chief economist for Brazil Roberto Secemski has for some time expected a 25-basis-point reduction this week and believes developments in economic variables since the June meeting have reinforced that call. In his view, the Central Bank already signaled a preference for continuing the easing cycle in June by extending the relevant policy horizon earlier than the current institutional framework would suggest (18 months), citing the estimated effects of El Niño on prices. The latest sequence of inflation and activity data, he adds, also supports continued calibration of the degree of monetary restraint.

“Indeed, since the last meeting, most data have come in weaker than expected, although not to the extent that the risks to inflation converging to target have disappeared. We’re still operating in an environment that calls for caution,” Secemski says. He notes that the recent improvement in headline inflation owes largely to a reversal in at-home food prices, and that the easing in core inflation has been driven mainly by specific items, while labor-intensive services inflation reached a nine-year high, rising 7.3% year over year.

On Copom’s communication, the Barclays economist doesn’t expect the Central Bank to close the door to further cuts, nor to openly endorse another 25-basis-point move. “I believe the message will be ‘agnostic’ regarding future decisions, meaning Copom will stay data-dependent. My expectation, however, is that the balance of risks will continue to be tilted to the upside, though it’s not clear to me whether that will appear in the statement or only in the minutes, as happened at the previous meeting.”

BV chief economist Roberto Padovani also expects a statement that offers no guidance on the Central Bank’s next moves, leaving the door open to either further easing or a pause beginning in September.

“Given the high degree of uncertainty, the Copom will continue to avoid committing to its next steps. That’s been the approach adopted by central banks in general,” he says.

 

Padovani also expects another cut to 14%, pointing not only to the Central Bank’s “preference” for continuing to lower rates but also to recent data supporting that scenario—particularly July’s IPCA-15 inflation reading, which he views as an important sign that inflation continues to converge toward target, albeit slowly. Weaker economic growth is also expected in the near term.

“With weaker activity and inflation converging, this calibration makes sense from the Central Bank’s perspective. Monetary policy will remain tight, but to a lesser degree.”

Daycoval chief economist Rafael Cardoso also expects the Copom to cut the Selic by 25 basis points on Wednesday and to refrain from providing guidance for the next meeting, keeping alive the possibility of another cut in September.

“When we update our model assumptions, inflation projections for the new relevant horizon—the first quarter of 2028—should change very little from previous estimates and remain around 3.2%. If that proves correct, and the model incorporates the rate path embedded in the Focus survey, there may be room for another 25-basis-point cut. That’s not our base case, and conditions would have to evolve favorably for it to happen, but the probability isn’t zero,” he says.

Daycoval’s baseline scenario has the Central Bank pausing once the Selic reaches 14%.

“In our assessment, the probability of another cut in September is still a minority scenario. If the decision brings any surprises—a lower inflation forecast, say, or comments suggesting a September cut has become the likelier outcome—we may revise our view. But for now, we see this as the pause cut,” he says.

 

Having ranked among the Top 5 in several Focus survey categories in recent months, Linus Galena economist Ricardo Meirelles de Faria holds a more optimistic view, arguing that the current level of rates is excessively restrictive despite highly expansionary fiscal policy.

“I personally expect 25-basis-point cuts at each of the next four meetings, even with the back-and-forth developments in the war with Iran,” he says.

The economist notes that much of the market was disappointed by Copom’s June meeting, despite a cut having been widely priced in. In his view, part of that frustration stemmed from the Central Bank’s “clumsy” communication.

“I believe the communication will now be similar in substance, but I expect the Central Bank to be more careful when discussing inflation’s convergence toward target over the relevant horizon,” Meirelles says, adding that Copom may leave the door open to another cut at its September meeting.

 

“When we look at activity data and the IPCA, there’s room to bring the Selic down a bit further. Real interest rates are still very high, and in that sense, I know I’m somewhat outside the consensus,” he says, projecting the benchmark rate at 13.25% by year-end. “Obviously, a lot can happen, and we’ll have to monitor the elections, but the feeling is that some of that is already reflected in market prices.”

Parcitas Investimentos chief economist Vitor Martello also expects a 25-basis-point cut at Wednesday’s meeting and believes the odds of another cut of the same size in September are rising.

“Will it signal anything about September? We don’t think so. This Central Bank doesn’t usually make decisions in advance, especially in an environment of elevated uncertainty. The strategy should continue to be monitoring data on aggregate demand, economic activity and inflation—particularly core inflation—and making the decision considered most appropriate at each meeting. In our view, that decision would be to cut another 25 basis points next week and then stop at 14%,” he says.

 

“Our assessment is that the Central Bank is gaining, not losing, confidence in its baseline scenario—one of inflation remaining under pressure but gradually converging toward target, with high rates being transmitted through the economy, which the data are confirming,” he says.

Looking beyond August, BV’s Padovani believes the ideal approach is to pause the easing cycle amid a macroeconomic environment filled with uncertainty. “I think a pause makes sense now, and as the dynamics of inflation become clearer, the process of cutting rates could resume at some point in 2027,” he argues.

Among the factors that still need greater clarity, the economist cites the dollar’s behavior through year-end, the likely effects of El Niño on food inflation, and market perceptions of fiscal policy following the presidential election.

*By Gabriel Caldeira, Victor Rezende and Gabriel Roca — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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