Brazil's Azul raises over $570m in IPO

Brazil's Azul raises over $570m in IPO

Brazil Equity

Azul raised BRL1.79bn ($570.6m) in its initial public offering, shrugging off last week’s delays from Brazil’s securities watchdog (CVM), which suspended the transaction.

The airline offered 72m preferred shares at BRL21 apiece, the midpoint of a marketed price range. Bookrunners, however, immediately exercised a hot shoe and increased the transaction to 82.8m shares, according to three equity capital markets sources.

Azul’s dual-listed IPO comprised 27.6m American depositary shares (ADSs), which equal three preferred shares. The ADSs priced at $20.06 apiece, one ECM source said.

Order books were up to seven times oversubscribed, a second ECM banker told LatinFinance. Approximately 65% of the book comprised US long-only investors, 10% came from outside the Americas and the rest from Chilean and Brazilian accounts, he added.

Both ECM bankers are confident the IPO will be upsized by a further 20%, under a green shoe option, taking the total offering size to roughly $643m. Leads have 30 days to exercise this.

Azul’s market capital was weighed at $8.3bn after the offering priced, a third source added, valuing the airline at a 4% premium to rival carrier Gol.

The selling shareholders included Saleb II, Star Sabia, WP-New Air, Azul HoldCo, ZDBR, Bozano, Maracatu, Morris Azul, Trip Investimentos, Trip Participacoes and Rio Novo Locacoes.

Citi, Deutsche Bank and Itau BBA were lead coordinators on the offering, while Banco do Brasil, Bradesco, JPMorgan, Raymond James and Santander were also worked on the IPO. The banks set the pricing range between BRL19 and BRL23 per preferred share and $18.02 and $21.81 for each ADS.

Azul’s IPO received a minor scare last Thursday when Brazil’s CVM suspended the offering for up to 30 days. The airline uploaded documents to the website RetailRoadshow, which included projections on the returns of Azul’s investment in Portuguese carrier TAP, which were not included in the prospectus, CVM said.

CVM also said Azul provided confidential information on the price per share and the demand for the IPO to local media outlets, including O Estado de S. PauloUOL Economia and Brazil Journal.

Azul shelved plans for an IPO in August 2015, due to volatility in foreign exchange rates. Brazil’s real depreciated approximately 24% against the dollar in the first half of 2015.

After the failed IPO attempt, Azul sold a 23.7% stake to China’s HNA Group in November 2015 for $450m. It also bought $100m in convertible securities from airline TAP Portugal in March 2016 as part of the agreement with HNA. The securities could be converted into preferred shares, equal to a 40% stake in the Portuguese carrier.