Aliansce, BR Malls closer to merge operations

Shopping mall operator Aliansce Sonae made its third proposal of the year for a merger with BR Malls — and this once it had a considerable advance. BR Malls agreed to discuss the terms and take the decision to a vote of the shareholders. The previous offers had been rejected by the board.

The real possibility of combining the businesses, in a deal that was becoming a battle, encouraged investors. Aliansce shares rose 1% and BR Malls shares gained 7.9%.

This time, Aliansce offered to pay R$1.25 billion in cash to BR Malls shareholders and, in the exchange ratio, add 326,339,911 shares — in the proportion of 0.39 shares per BR Malls share. This is the lowest amount in cash offered so far, but the highest percentage in shares, one of the main points questioned by BR Malls’s management team about the previous offers.

In the current exchange ratio, BR Malls would get 55.2% of the combined company plus the cash payment, compared to 51% plus R$1.85 billion under the terms presented in March and 50% offered in January with R$1.35 billion in cash.

In financial terms, the second and third proposals are even similar. Combined, Aliansce and BR Malls are worth R$13.48 billion. Therefore, the additional 4.2% in share capital in relation to the second proposal is worth R$566 million.

But it makes a difference the currency in which this amount is paid. The main advantage in the current offer would be the new potential high with the companies added together and in governance, as it guarantees a majority to BR Malls shareholders.

Valid for 10 days, the proposal was presented to BR Malls on Monday and the company had committed to hold a board meeting on Tuesday to evaluate it. BR Malls communicated in a material fact notice that the board unanimously decided to authorize the executive board to negotiate the terms with representatives of Aliansce and prepare documents for an extraordinary meeting.

BR Malls understands that the adjustment in share capital is a “demonstration of willingness and commitment” by Aliansce — but that there are still terms to be discussed.

“We have taken an important step now to engage the two companies in dialogue and take the new proposal to the meeting. Our approach is constructive, aiming at an understanding,” João Roberto Teixeira, a board member at BR Malls, told Valor’s business website Pipeline. “This does not mean that we agree with this price, and still requires us to evaluate a set of fundamental aspects to set a deal.”

Among these aspects are issues such as company governance (the composition of the board, for example, a point that created friction in the first proposal, has not yet been discussed), dividend policy, management composition and portfolio composition (which assets the company would have to get rid of in a merger, for example, due to overlaps in some regions).

With this discussion and documents in hand, BR Malls’s management team will give its voting recommendation to shareholders, for approval or not of the merger — even if it is the investors’ decision.

“We are still exploring other alternatives, without any kind of exclusivity with Aliansce,” Mr. Teixeira said. The company is still in talks with Ancar, but this is a slower negotiation.

Analysts have a positive view on the new proposal from Aliansce. Bradesco BBI’s Bruno Mendonça and Pedro Lobato pointed out that the new terms imply a premium of 13% over BR Malls shares, considering Tuesday’s price. They estimate that the new company would be negotiated at a multiple of 9.4 times the enterprise value to EBITDA (of 2022), excluding synergies — an attractive price, they say.

Citi also now sees a greater possibility of approval than rejection of the proposal. BR Malls is advised by Itaú BBA, while Aliansce hired BTG Pactual.

In addition to the adjustment of terms, BR Malls’s decision on the new approach of the rival may also be linked to pressure from asset managers such as Truxt, Miles and Oceana. For these firms, the issue should have already been put to a vote by shareholders in the second offer.

The tone between the companies was also raised last month when BR Malls required the antitrust regulator CADE to evaluate the behavior of the competitor — in addition to having requested an injunction to prevent Aliansce from exercising its political rights as an investor. Aliansce owns about 11% of BR Malls and had already requested the list of shareholders of the target company.

Sources say that Aliansce delivered this week its arguments to the CADE, and now the regulator is evaluating the position of each side. If the merger goes ahead, they may not even need the watchdog’s opinion on the issue of political rights.

The original story in Portuguese was first published on Valor’s business website Pipeline.