October 16, 2018 / 4:13 PM / a month ago

UPDATE 1-Brazilian card processor hopes to lure Buffett with $1.1 bln Nasdaq IPO

(Adds Stone’s potential market cap and Buffett’s investment in Synchrony Financial)

By Carolina Mandl

SAO PAULO, Oct 16 (Reuters) - Brazilian card processor Stone Co Ltd filed on Tuesday for an initial public offering on Nasdaq that may raise up to $1.1 billion and lure Warren Buffett’s Berkshire Hathaway Inc as a shareholder, according to a securities filing.

Berkshire Hathaway and some of Stone’s current shareholders may acquire up to almost half of the 47,727,273 shares offered in the IPO, according to the filing.

The company set the IPO price range at between $21 and $23 per share and could reach a market capitalization of up to $6.2 billion on its debut on Nasdaq.

Other Stone shareholders include Brazilian investment firm 3G Capital Inc’s founders, Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira. 3G Capital and Berkshire Hathaway already share control of Kraft Heinz Co.

Individually, Berkshire Hathaway may buy up to 13,712,960 shares, expanding Buffett’s portfolio in payment companies, which already includes shares in American Express Co. In August, Buffett also disclosed a stake in the credit card issuer Synchrony Financial.

Madrone Capital Partners, a U.S.-based investment firm that manages part of the fortune of the Walton family, which founded Walmart Inc, and other current shareholders may also buy another 9.5 million shares in the offering, according to the filing.

The involvement of deep-pocketed international investors underscores the potential growth of electronic payments in a country where only two-thirds of families’ consumption is paid in cash. In 2017, card payments totaled 1.36 trillion reais ($367.24 billion), according to the country’s card industry group, Abecs.

Both Stone and some of its shareholders, including founders André Street and Eduardo Pontes, will sell a small portion of their shares in the offering.

The IPO will raise $950 million for Stone to acquire companies or invest in complementary products and technologies, while shareholders will receive the remaining proceeds in the so-called secondary portion of the offering.

Stone has 200,600 active clients and posted a net income of 87.7 million reais ($23.68 million) and total revenues of 636 million reais ($171.74 million) in the first half of 2018.

Founded in 2012, Stone has been growing in a once duopolic market between Cielo SA and its rival Rede, owned by Itaú Unibanco Holding SA. After regulation changes, though, both companies lost exclusive rights to process Visa and MasterCard transactions in Brazil and began losing market share to new competitors.

PagSeguro Digital Ltda, which listed its shares in the New York Stock Exchange in January, is another newcomer to the Brazilian card processing market.

Stone’s IPO will be managed by Goldman Sachs, J.P. Morgan, Citigroup, Itaú BBA, Credit Suisse, Morgan Stanley, Bank of America Merrill Lynch and Banco BTG Pactual SA. ($1 = 3.7033 reais) (Reporting by Carolina Mandl; editing by Jonathan Oatis)

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