April 10, 2017 / 3:30 AM / 9 months ago

Exclusive - Brazil's Votorantim Metais considers IPO, sources say

SAO PAULO (Reuters) - Votorantim Metais Holding SA, one of Latin America’s largest producers of base metals, is considering an initial public offering to fund investments and provide parent company Votorantim SA with cash to expand in other core areas, four people with direct knowledge of the transaction said.

The São Paulo-based company, known as VMH, is seen completing a three-stage IPO preparation plan by September, according to one of the people. Toronto and New York appear to be the favored destinations for a VMH listing, the person said.

Talks with investment banks are at an advanced stage, with Bank of America Corp (BAC.N), Morgan Stanley (MS.N) and JPMorgan Chase & Co (JPM.N) among those said to be vying for underwriting spots, two of the people said.

The four people spoke under condition of anonymity because the transaction remains private. They did not detail a tentative structure and timetable for the transaction or give an estimated value for VMH.

The IPO would give VMH access to a wide base of investors betting on a long-term recovery in zinc, copper, lead and silver prices, the first person said.

Proceeds may come in handy for parent Votorantim, Brazil’s largest diversified industrial group, which is growing in energy, pulp and agribusiness while cutting a 14.7 billion-real ($4.7 billion) debt burden, the people added.

Contacted on Sunday, media officials at parent Votorantim, which is controlled by Brazil’s billionaire Ermirio de Moraes family, declined to comment on “market speculation.”

Bank of America did not have any immediate comment. Morgan Stanley and JPMorgan declined to comment.


VMH is the latest addition to a long list of Brazilian companies pursuing IPOs in coming months to rebalance their capital structure and pave the way for future expansion.[nL1N1F60K9]

Some large Brazilian groups are taking advantage of a revival in capital markets activity this year to list some subsidiaries or exit businesses, as well as to raise cash to bring down debt.

Bankers expect up to one-fourth of planned Brazilian company listings for this year to happen overseas.

    The local subsidiary of France’s Carrefour SA (CARR.PA), as well as airline Azul SA and N2com Internet SA, known by the online shoe retailing brand Netshoes, are seeking to list their operations domestically or overseas.

    With a presence in Brazil and Peru, where it holds a majority stake in Cia Minera Milpo SA MIL.LM, VMH operates five industrial compounds in Brazil’s state of Minas Gerais, and in Cajamarquilla in Peru. VMH also has sales offices in Houston and Luxembourg.

    Last year, investments in zinc and byproducts represented 11 percent of Votorantim’s capital spending of about $3 billion. Those investments included efforts to extend the working life of the Vazante mine in Brazil for another 10 years.

    Net revenue at Votorantim’s zinc and byproducts division came in at 6.386 billion reais last year, with adjusted earnings before interest, taxes, depreciation and amortization of 1.328 billion reais.

    EBITDA, as the gauge of operational profits is commonly known, reached 21 percent of revenue, making the zinc and byproducts division the most profitable activity among parent Votorantim’s five business segments in last year’s financial results.

    ($1 = 3.1301 reais)

    Editing by Daniel Flynn and Steve Orlofsky

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