Brazilian payments company Cielo eyes consolidation deals

SAO PAULO (Reuters) - Brazil's Cielo SA CIEL3.SA is considering potential mergers and acquisitions to consolidate its card-processing business, Chief Executive Paulo Caffarelli told reporters on Wednesday, ruling out reports that the company was in talks over a sale to rival StoneCo Ltd STNE.O.

"Cielo is not up for sale," he declared after outlining its strategy to contend with competition from newcomers such as StoneCo and PagSeguro Digital PAGS.N, which is driving down prices.

Shares in Cielo fell nearly 6% in morning trading after it posted a 50% drop in third-quarter net income on Tuesday, missing analyst estimates.

The company is likely to show some positive results from its new selling strategy in 2020, though it remains difficult to predict profit growth, Caffarelli said.

Although Cielo has moved towards smaller merchants, the company’s profitability is still falling.

“Cielo seems willing to fight, but a solution is still needed,” analysts at BTG Pactual said in a note to clients.

The company has been shortlisted to form a joint venture with state-controlled bank Caixa Economica Federal to sell products and services to the lender’s clients, Caffarelli added.

Reporting by Aluisio Alves; Writing by Carolina Mandl; Editing by David Goodman