The long-awaited move was also made by rival banks
02/06/2024
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Cielo repeats move made by other major banks with their card acquirers — Foto: Divulgação
Banco do Brasil and Bradesco, Cielo’s controlling shareholders, have decided to make a takeover bid to take the credit card company off the stock exchange. The move, which had been expected by the market for years as the company lost market share to rivals Stone and PagSeguro, came as a surprise due to its timing. Expectations had cooled as the card acquirer’s results recovered.
No date has yet been set for the takeover bid. The amount to be paid per share is expected to be R$5.35, up from Monday’s close of R$5.03. Bank of America has been hired as the independent appraiser of the transaction. The shares are up 10.79% since the beginning of 2024, but are down 52.55% over five years.
In a notice of material fact, BB reported that its board of directors had approved an increase in its indirect stake in Cielo to 49.99%. Bradesco’s statement does not mention a stake.
With the takeover bid, Cielo’s registration as a public company with the CVM will be changed from category “A” to “B,” which includes issuers with securities other than shares. “The application for registration of the tender offer with the CVM will be made within the time limit set by the applicable regulations,” BB said.
The buyback repeats the move made by other major banks with their card acquirers. In the past, Santander listed its acquirer Getnet on the stock exchange, but withdrew it from the market shortly thereafter. The same happened with Itaú’s Rede, whose shares were traded on the market in the 2000s.
Cielo has been losing market share for several quarters, and market participants and analysts point to a more aggressive competitive stance by acquirers linked to non-listed banks—in other words, Rede and Getnet. In the second quarter of last year, Cielo lost the lead to Rede.
An executive familiar with the talks said that BB and Bradesco had already been discussing a delisting and, after much discussion, reached an agreement, even though the company’s shares have risen in recent months. Currently, the card acquirer has a market capitalization of R$13.7 billion. Bradesco owns 30.06%, BB 28.65% and 40.57% are floating shares.
The discussions have been going on for years and have passed through several federal administrations, cooling and heating up at certain times. There were talks during the last administration, but according to a source, they are flowing better now. Banco do Brasil is a state-run bank.
Cielo released its results last night and once again felt the impact of its strategy to focus on profitability in the fourth quarter. The card acquirer saw a decline in volumes processed and in its active client base. On the other hand, receivables factoring products broke records.
The company reported recurring net income of R$480.8 million in the fourth quarter, up 5.3% from the previous quarter, but down 1.9% from the same period in 2022. According to the company, the decrease reflects the lower volumes processed by Cielo Brasil and the increased investments in the commercial team and the operational transformation process. These factors were partially offset by the steady improvement in the financial result, it added.
Net operating revenues for the period stood at R$2.77 billion, up 5.8% quarter-over-quarter and 0.6% year-over-year. Cielo Brasil’s revenue decreased by 2.4% compared to the same period of 2022, while Cateno’s revenue increased by 5.2%. In the fourth quarter, the card acquirer’s total payment volume (TPV), after losing market share in recent quarters, was R$221.85 billion, up 12.4% quarter-over-quarter and down 4.1% year-over-year. On the credit side, the volume decreased by 1.1% year-over-year. On the debit side, it decreased by 8.4%.
The company ended the year with 870,000 active customers, down 5.3% quarter-over-quarter and 17.7% year-over-year. Cielo said the decline was mainly due to the behavior of smaller customer segments. The “take rate” (the fee charged for each transaction) was 0.74%, compared with 0.79% in the third quarter and 0.72% a year earlier. The card acquirer also reported a new record in term products. The receivables factoring solutions amounted to R$33.7 billion.
*Por Álvaro Campos, Mariana Ribeiro — São Paulo
Source: Valor International