UPDATE 4-Biosev postpones Brazil IPO in blow to owner Dreyfus

Thu Jul 19, 2012 8:50pm IST

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* Biosev suspends IPO pricing indefinitely on demand
    * Had suggested one-day delay would muster bidding
    * Signals caution among investors over Brazil IPOs


    By Joan Magee and Guillermo Parra-Bernal
    NEW YORK/SAO PAULO, July 19 (Reuters) - Biosev, the
Brazilian unit of global commodities company Louis Dreyfus Corp
, suspended on Thursday its initial public offering
for an indefinite period, citing a lack of demand from
investors. 
    Demand for the IPO faltered only hours before it was priced,
a source told International Financing Review, a Thomson Reuters
publication specializing in capital markets and corporate
finance transactions. Louis Dreyfus had filed to sell as many as
55.64 million common shares of Biosev, in a transaction that
could raise up to $548 million.
    The offering was scheduled to price before midnight on
Wednesday, but early on Thursday the company sought to revive
the deal by postponing pricing by one more day. Yet,
deteriorating market conditions forced Biosev to suspend the
deal, Chairman Kenneth Geld said in a statement.
    "The uncertainties in financial markets were behind our
decision," Geld said in the statement. "We are sure that, once
the economic picture gets better, many opportunities to execute
our IPO will arise."
    The decision signals that investors, who last year steered
clear of most IPOs in Brazil as Europe's debt crisis worsened,
may keep shunning companies with great ambitions but
insufficient track records, poor earnings visibility, or
vulnerability to a downturn. 
    The suspension also deals a blow to Louis Dreyfus in its
attempt to raise cash to expand its output of sugar cane and
ethanol. Even global companies with outstanding track records,
such as the 160-year-old French company, are not exempt from
investor skepticism over IPOs in Brazil.
    Instead of IPOs, more investors have been buying Brazilian
follow-on offerings, where risk is easier to assess.
    "We just didn't have the book," the source, who requested
anonymity because the decision had not been made public yet,
told IFR late on Wednesday.
    
    Biosev had hired the investment banking units of Banco
Bradesco, Itaú Unibanco Holding, Banco
Votorantim, Banco do Brasil, Banco
Santander and JPMorgan Chase & Co to manage the
transaction.
    The banks were entitled to earn about $16.2 million in fees
from the IPO, according to data provided by the securities
regulator CVM.
        
    CASUALTY OF THE CRISIS
    Louis Dreyfus was one of the first multinational groups to
enter Brazil's cane sector, when it snapped up the ailing
Santelisa Vale milling group in 2009 in what many industry
specialists thought was a steal in the wake of the global
financial crisis. 
    Santelisa Vale, which was considered the crown jewel of the
sector and had some of the most modern and efficient mills at
the time, was recently renamed Biosev in advance of Louis
Dreyfus' planned spinoff of the unit.
    Many milling groups and investors in Brazil had highly
leveraged their expansion plans when oil reached $147 a barrel
in early 2008, at the start of the worst global financial crisis
in eight decades. They were devastated when credit markets
seized up later that year.
    Falling sugar prices and losses from ethanol production due
to the Brazilian government's decision to hold down fuel prices
have also contributed to continued fragility in the cane sector.
    Biosev owns 11 mills across the southeastern states of Sao
Paulo and Minas Gerais and two others in the northeast. All but
one produce both sugar and ethanol. Combined annual output is
about 2.8 million tonnes of sugar and 1.8 billion liters of
ethanol.
    The Biosev IPO had a suggested price tag of 16.50 reais to
20.50 reais a share, but investors who expressed early interest
were looking to pay below that range, another source with no
direct involvement in the deal, told Reuters late on Wednesday. 
    The deal was originally scheduled to price on June 28, but
was put off as risk aversion intensified.
    The proximity to another deal, the $955 million IPO of power
utility Transmissora Aliança de Energia Elétrica that is slated
to be completed later on Thursday, might have scared potential
investors away from Biosev's offering, the second source added.
    A source with knowledge of the deal said pricing and demand
for shares of Transmissora, or Taesa, stock "look pretty strong"
at this point, with firm orders from investors topping by more
than three-fold the amount of shares being offered.
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