TJ, sell gold: Cosan is making an initial public offering of about 16 million shares on the Sao Paulo Stock Exchange Bovespa in order to raise capital for acquisitions to keep up with consolidation in Brazil's huge cane industry, analysts said.
Do you think I should tell MQ to sell QCOM and get on board too??
cosan.com.br
Brazil's Cosan IPO offers sugar-ethanol boom stake
Wed Nov 9, 2005 7:47 AM ET
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By Reese Ewing
SAO PAULO, Brazil, Nov 9 (Reuters) - Cosan SA, the world's largest sugar and ethanol producer, will offer investors a stake in Brazil's sugar-ethanol boom and generate capital to fund company expansion, analysts said.
Cosan is making an initial public offering of about 16 million shares on the Sao Paulo Stock Exchange Bovespa in order to raise capital for acquisitions to keep up with consolidation in Brazil's huge cane industry, analysts said.
Company shares were supposed to be assigned an opening price on Tuesday and begin trading on Thursday. But on Monday Brazil's CVM market watchdog suspended Cosan's IPO until Nov. 17 for alleged violation of market regulations prohibiting making statements during the quiet period.
Cosan denied on Wednesday that it or its lead investment bank Morgan Stanley had divulged information beyond the company prospectus.
But analysts say the delay will not affect the IPO.
"Even though I don't recommend the stock based on its (expected) opening price, I don't think the CVM's suspension will affect the success of the IPO. Demand for it is big," Fama Investimentos analyst Celso Boil Jr. said.
He said that shares in the most recent local IPO, of retail bank Nossa Caixa,on the Bovespa were so over subscribed that investors only got about 5 percent of what they had ht.
Analysts said there is a healthy demand for just about any offering in Brazil. The recent IPOs of Nossa Caixa, Dasa, Porto Seguro, Submarino, Gol, ALL, Natura and others were all oversubscribed, after several years without initial pubic offerings in Brazil due to unfavorable market conditions.
Boin said the opening share price range of Cosan of between 40 and 46 reais each was roughly the range in which his estimates put the company's value, and thus offered little bargain for the risk of investment.
"Moreover, the capital they are raising is unlikely to pay down debt or for cash flow but for acquisitions," he said.
But other analysts were more optimistic about Cosan's market share in Brazil's blossoming sugar and ethanol sector.
Brazil's Cosan IPO offers sugar-ethanol boom stake
Wed Nov 9, 2005 7:47 AM ET
Printer Friendly | Email Article | Reprints | RSS (Page 2 of 2)
"This is really the first chance for small investors to get in on one of Brazil's major agricultural booms, something that was previously reserved for medium to big investors," analyst Fabio Anderaos at Geracao Futuro brokers said.
He said with the expected gradual decline in trade barriers in sugar and the demand for alternative fuels due to oil prices, the future of the cane sector looked very bright.
Brazil is the world's largest producer and exporter of sugar and ethanol.
The cane sector has entered into a new expansion cycle in the past years. It is expected to soak up a good share of the world's white sugar market that will come up for grabs with the end of EU sugar subsidies, after Brazil won its case against them at the World Trade Organization earlier this year.
The successful debut in Brazil in 2004 of flex-fuel cars that run on ethanol, gasoline or any combination and record high oil and gasoline prices have boosted demand for cane-based ethanol at home and abroad.
Brazilian mills are facing a serious challenge expanding cane production and processing capacity fast enough to keep pace with growing demand in sugar and ethanol.
The Brazilian government said it was negotiating to lessen trade barriers against ethanol exports, which reached a record 2.5 billion liters in 2005, and could challenge high tariffs in end-markets such as the United States at the World Trade Organization if friendly negotiations failed.
"Brazil's cane sector started a slow consolidation in 2001," KPMG consultants partner Andre Castello Branco told Reuters. "Many of the 300 odd mills are still small family-owned operations."
"There is big potential for consolidation which takes capital. Many are already underway -- Louis Dreyfus' Coinbra, the Jose Pessa Group, Carlos Lyra ... now Cosan," Branco said. |
