Energisa
During the first half of 2016, activity in Brazil’s equity capital markets virtually dried up.
Investor anxiety over the country’s political turmoil and protracted economic recession extended a dry spell in equity offerings from Brazilian companies that first began in mid-2015.
But sentiment toward Brazil began a dramatic shift in June and July, as the impeachment of former President Dilma Rousseff moved forward and interim president Michel Temer unveiled a series of market-friendly policies.
Brazilian power company Energisa capitalized on the renewed investor interest and, following an extensive roadshow, it launched an offering of new stock with the aim of reducing its debt. The transaction, which takes the award for Equity Follow-on of the Year, was one of Brazil’s largest follow-on sales and effectively reopened the market for Brazilian corporates.
“The timing was perfect,” says Mauricio Botelho, Energisa’s chief financial officer. “There were no other Brazilian corporates in the market at the time and no other Latin American transaction. We had the market all to ourselves.”
Investors flocked to the share sale, which raised $415 million. Energisa’s stock rose nearly 9% in the first day of trading. The company later exercised the greenshoe option, increasing the amount raised to around $485 million, or 1.5 billion reais. The offer was the largest by a Brazilian power firm in more than 10 years, eclipsing a 1.345 billion-real primary offering in September 2006 by Eletropaulo.
“When we went out to sell the transaction, the sentiment was that the impeachment was going to happen,” Botelho says. “All of the investors were tuned into the change of government. The news out of Brazil at the time was very positive.”
The deal was more complicated than a typical equity follow-on because of the illiquidity of the existing stock. Indeed, billed by many as a “re-IPO”, lead arrangers set a price range for the new units on offer instead of simply pricing off trading levels on the day of execution, as is typical for a follow-on.
The offering also reflected improving investor perception of Brazil’s energy industry where consolidation is fueling expectations for growth once Brazil’s economy turns around.
Botelho says he thinks 2017 will be a busy year for Brazil’s sixth-largest power distribution company, with the government planning to put some transmission and power generation assets up for auction. “I think we will have an opportunity to grow by acquisition or through new transactions,” he says. LF
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Size: BRL1.45bn ($485m)
Date: August 2016
Supporting banks: Banco Modal, Bank of America Merrill Lynch, BTG Pactual, Bradesco BBI, Citi, Santander, XP Investimentos
Supporting law firms: White & Case, Skadden, Mattos Filho, Stocche Forbes Advogados
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