Beef Giant Minerva Slumps After $300 Million Share Sale

(Bloomberg) -- Brazilian beef giant Minerva SA slumped in Sao Paulo trading on Friday after investors secured an almost 9% discount to buy its shares in a public sale.

The stock lost as much as 7.4% and was trading at 13.45 reais at 1:45 p.m. local time after an equity offering priced at 13 reais late Thursday. That compares with the last closing price of 14.27 reais.

The Sao Paulo-based meatpacker and its controlling shareholder, VDQ Holdings, raised a total of 1.24 billion reais ($300 million), kicking off what may be a deluge of share sales in Latin America’s largest economy this year.

The offering may have been affected by a bad week for Brazil’s protein sector, with China renegotiating beef prices with South American exporters and the spread of coronavirus in Asia, which could hurt meat purchases, according to Ilan Arbetman, an analyst at Brazilian brokerage Ativa Investimentos. China is the main destination of Brazilian beef.

On Jan. 21, Goldman Sachs lowered the stock to sell from neutral, setting 12 reais as a target price.

‘Priced In’

In the past year, Minerva leads a global index of meat stocks with a 142% increase, followed by Marfrig Global Foods SA and JBS SA. For Goldman Sachs analyst Luca Cipiccia, the “positive momentum is fully priced in.”

The price set in the public sale may put some pressure on the stock in the short term, but it’s positive for shareholders given that about 1 billion reais in proceeds is earmarked for paying down debt, allowing the company to pay dividends by year-end, according to brokerage Guide Investimentos.

Minerva, which sold 80 million new shares, is on track to achieve the lowest leverage metrics among Brazilian meat companies this year, according to Lucror Analytics.

VDQ Holdings, which belongs to the family that founded the company, sold 15 million shares. That may be seen as an indication VDQ decided to book profit after the company’s recent rally, Ativa’s analyst said.

The new shares will start trading on Jan. 27. Banks running the deal included Banco BTG Pactual, JPMorgan Chase & Co., Banco Bradesco BBI, BB Banco de Investimentos and Itau BBA.

©2020 Bloomberg L.P.

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