(Adds details on sale, proceeds throughout in paragraphs 9, 13)
By Guillermo Parra-Bernal
SAO PAULO Dec 14 Brazilian homebuilder Gafisa
SA agreed on Wednesday to sell a minority stake in subsidiary
Construtora Tenda SA after a planned initial public offering of
the unit collapsed amid escalating political turmoil in Latin
America's largest economy.
Under terms of the transaction, Gafisa will sell
up to 30 percent of Tenda to New York-based Jaguar Growth
Partners LLC's asset management unit at a price of 8.13 reais
per share. The deal came hours after Gafisa scrapped a Tenda
initial public offering in São Paulo, citing deteriorating
The sale to Jaguar values Tenda at 539 million reais ($161
million), or less than one-third what Gafisa sought to fetch if
the IPO priced at the top of the suggested price range. Gafisa
had put 40 million shares of Tenda up for sale in the IPO at a
range between 12.50 reais and 16.50 reais.
Jaguar's bid for Tenda, which builds low-cost housing,
underscores how some foreign funds are using Brazil's political
crisis and recession to beat rivals. Demand for Tenda's IPO was
weighed down as the market grappled with allegations that
President Michel Temer is involved in a massive graft scheme as
well as social unrest after the passage of deficit-cutting
legislation, two people familiar with the deal told Reuters.
Scant firm orders from Brazilian pension funds and other
institutional investors could force Tenda to seek alternatives,
including giving Gafisa shareholders priority in final
allotments of Tenda stock, a private placement or a stake sale,
Reuters reported on Monday.
Gary Garrabrant and Thomas McDonald helped found Jaguar
three years ago to focus on real estate investments in emerging
markets. McDonald recently told Business News Network that
Jaguar was actively investing in industries with unsatisfied
demand in Brazil from retailing to shopping malls and specialty
Jaguar, Gafisa and Tenda did not have an immediate comment.
Shares of Gafisa rose as much as 4.5 percent to 2.07 reais.
Gafisa plans to use proceeds from the deal to reduce a debt
burden that reached 80 percent of equity earlier this year, a
person familiar with the company's strategy said. Under terms,
Tenda was valued at about 0.5 times book value, well below the
0.8 times that Gafisa intended with the IPO.
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 during the talks,
five investors told Reuters in recent days.
"Tenda's investment case certainly remains an attractive one
to investors, but we wonder whether pricing it at the bottom or
below would be a smart move," said Adeodato Volpi Netto, head of
Eleven Financial Research in São Paulo.
Traders said bringing in a so-called anchor investor like
Jaguar could help facilitate a Tenda listing in the future.
In a separate statement, Gafisa said at least 232 million
reais will go into its coffers, noting it could get about 88
million if Jaguar exercises an additional 20 percent allotment
of Tenda shares.
($1 = 3.3378 reais)
(Additional reporting by Tatiana Bautzer in São Paulo; Editing
by David Clarke and Jeffrey Benkoe)