(Adds details, context throughout)
By Guillermo Parra-Bernal
SAO PAULO Dec 14 Brazilian homebuilder
Construtora Tenda SA scrapped an initial public offering due to
be priced later on Wednesday because of challenging market
conditions, in the latest sign of Brazil's increased political
turmoil weighing on investor sentiment.
Tenda and sole owner Gafisa SA said in a
securities filing they were "working on the analysis of
strategic alternatives for Tenda, with the main goal of
maximizing shareholder value."
Gafisa had aimed to sell 40 million shares of Tenda, or up
to a 40 percent stake, in the IPO.
Reuters reported on Dec. 12 that scant firm orders from
investment firms, pension funds and other institutional
investors could force Tenda to price the offering at the lowest
end of a suggested price range, or seek alternatives.
Options included giving Gafisa shareholders priority in
final allotments of Tenda stock, a private placement or a stake
According to two people involved in the transaction, the
boards of both companies agreed on suspending the IPO after more
tentative bids began to come in at below the suggested range of
12.50 reais to 16.50 reais apiece on Tuesday.
Gafisa, Tenda and the banks handling the IPO, the first for
a homebuilder in Brazil since 2009, did not comment.
Escalating political tensions fueled by allegations that
President Michel Temer's administration might be involved in a
massive graft scheme and growing social unrest stemming from the
passage of deficit-cutting bills in Congress "helped put the
brakes on this specific transaction," said the first person.
Last week, Gafisa put off the pricing date of Tenda's IPO by
one day, saying talks with investors were taking longer than
expected. Several investors balked at Gafisa's high valuation
target for Tenda of at least 1.2 billion reais ($360 million)
during those talks, five of them told Reuters in recent days.
Gafisa argued that the Tenda listing would give investors a
chance to seize on a three-year turnaround that has helped the
low-cost builder narrow the gap with rivals MRV Engenharia SA
and Direcional Engenharia SA.
"Tenda's case is certainly an attractive one to investors,
but we wonder whether pricing it at the bottom or below was a
smart move," said Adeodato Volpi Netto, head of Eleven Financial
Research in São Paulo.
Gafisa and Tenda had hired the investment banking units of
Itaú Unibanco Holding SA, Banco Bradesco SA, Banco do Brasil SA,
Banco Votorantim SA and Bank of America Corp to underwrite the
($1 = 3.3345 reais)
(Additional reporting by Tatiana Bautzer in São Paulo; Editing
by David Clarke and Alexander Smith)