September 21, 2016 / 11:17 PM / 2 years ago

UPDATE 1-Brazil's BR Properties mulls offering in sign of possible M&A

(Recasts with CEO comments and financial details throughout)

SAO PAULO, Sept 21 (Reuters) - BR Properties SA is analyzing whether to raise capital through a share offering, Chief Executive Martin Jaco said on Wednesday, a sign that the Brazilian commercial real estate company is preparing for potential acquisitions in coming months.

São Paulo-based BR Properties sees a so-called follow-on equity offering as a feasible way to raise funds, Jaco told investors at an event. Chief Financial Officer André Berenguer said, however, a potential debt offering could come first if conditions allow, or asset sales could take place.

Management is mapping out targets across office and industrial property, Jaco said, adding that about 4 billion reais’ ($1.3 billion) worth of potential acquisitions have been identified. A capital hike would bolster BR Properties’ balance sheet ahead of any purchase, Jaco and other executives said.

The remarks underscore Jaco’s efforts to focus on future expansion after a year marked by a harsh recession, soaring vacancies and declining rents and property prices. The company counts on fundraising support from No. 1 shareholder GP Investments Ltd, which won control of the property company in recent months, to undertake any fundraising.

While activity on the office rental market remains tough, there are signs of slower deterioration down the road, like fewer vacancies and rent renegotiations, the executives said.

Shares of BR Properties gained 1.3 percent on Wednesday to close at 8.57 reais, paring back losses to 3.5 percent in the past 12 months.


Despite keeping cash and equivalents worth 1 billion reais, analysts are concerned over BR Properties’ ability to raise debt. Net debt topped five times annual operational profit in June, in theory preventing BR Properties from engaging in any purchase in the short run, according to analyst Bruno Mendonça of Santander Investment Securities.

GP Investments, the largest Latin American private-equity firm and the owner of about 70 percent in BR Properties, has expressed the intent to remain in control of the company and to keep it listed on the São Paulo Stock Exchange, Jaco said.

Some analysts have attributed the performance of BR Properties shares this year to the failure of GP Investments’ efforts to win full control of the company after a series of buyout offers.

GP Investments could even be ready to subscribe new equity from BR Properties in a private placement, to help fuel growth, Berenguer said. ($1 = 3.2094 Brazilian reais) (Reporting by Ana Mano; Writing by Guillermo Parra-Bernal; Editing by Steve Orlofsky and Matthew Lewis)

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