Rossi, PDG Are Raising 2 Billion Reais in Brazil Share Sales

By Fabiola Moura and Heloiza Canassa

Oct. 2 (Bloomberg) -- Rossi Residencial SA and PDG Realty SA Empreendimentos & Participacoes, Brazilian homebuilders whose shares have more than doubled this year, are selling 2 billion reais ($1.11 billion) of new stock to tap surging demand.

Sao Paulo-based Rossi is offering 74.3 million shares for 12.50 reais each, according to data posted on the Web site of Brazil’s securities regulator last night. PDG of Rio de Janeiro and its stockholders are selling 75.6 million shares at a price of 14 reais.

The sales are the first of four from Brazilian developers scheduled for this month after an equity rally that sent the BM&FBovespa Real Estate Index up 170 percent in 2009. The offers from Rossi, PDG, Brookfield Incorporacoes SA and Cyrela Brazil Realty SA Empreendimentos & Participacoes may raise a total of 3.4 billion reais and will be used to boost growth, JPMorgan Chase & Co. analyst Adrian Huerta wrote in a note this week.

Demand is coming more from foreign investors than from local ones, said Silvio Araujo, real estate analyst at Lopes Filho & Associados, in a phone interview from Rio de Janeiro. Many real estate companies have no controlling shareholder, which “increases mobility, gives higher participation in all the businesses” for investors, he said.

Homebuilders surged as Brazilian policy makers cut interest rates to a record low, the economy showed signs of recovery and President Luiz Inacio Lula da Silva unveiled a 34 billion-real program to build 1 million homes. The benchmark Bovespa index rallied 61 percent in 2009.

Discounts

Rossi, the second-best performing stock in the Bovespa index this year with a 252 percent gain, sold shares at a 6 percent discount to today’s closing price of 13.30 reais. PDG’s offer was 2 percent below the close of 14.30 reais.

Rossi is trading 47 percent below the 25 reais price at which it sold shares in February 2006. PDG has fallen 43 percent since its last equity offering at 25 reais in October 2007.

Brookfield, a Rio-based real estate developer, may sell as much as 700 million reais of stock, the company said last month. Sao Paulo-based Cyrela, Brazil’s largest homebuilder, filed a request with the country’s investment bank association on Sept. 21 to sell new shares, without disclosing how many it plans to offer. Both companies have more than doubled in 2009.

At least seven companies have filed in the last two months to sell shares in secondary offerings, including Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest airline, and Cia. de Concessoes Rodoviarias, the largest toll-road operator.

Santander

Banco Santander SA, Spain’s largest lender, aims to raise as much as 13.1 billion reais in an initial public offering of its Brazilian unit next week. The IPO, the third in Brazil this year, would surpass Cia. Brasileira de Meios de Pagamento’s 8.4- billion real offering as the country’s biggest in history.

Direcional Engenharia SA may raise as much as 600 million reais in an IPO, according to JPMorgan’s Huerta. The sale will be the first homebuilder IPO in Brazil since Helbor Empreendimentos SA listed in October 2007. Fourteen developers began trading in 2007, part of a record year with 64 initial offerings.

To contact the reporters on this story: Fabiola Moura in New York at fdemoura@bloomberg.net; Heloiza Canassa in Sao Paulo at hcanassa@bloomberg.net