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First Brazil IPO Since July Flops

Brazil’s first initial public offering since July struggled to lure investors as Cia. de Locacao das Americas, a Sao Paulo-based car-rental company, priced shares 36 percent below the upper end of its target.

Locamerica and its holders are selling as many as 30.9 million shares for 9 reais ($4.82) each after saying in the prospectus they aimed to price the stock at between 11 reais and 14 reais, according to data posted on Brazil’s securities regulator’s website. The company may raise as much as 313.9 million reais in the primary and secondary offer, the data show.

“The main problem with IPOs such as Locamerica’s is that they’re not of a substantial size,” Ed Kuczma, who helps manage $34 billion at Van Eck Associates in New York, said by phone. “They’re small-, mid-sized companies that are trying to raise money. Large asset managers in the U.S. want to make sure there’ll be sufficient liquidity so they can be able to trade on these companies once they go public.”

Locamerica’s listing broke the longest drought in Brazilian IPOs since a 12-month dry spell in the wake of the collapse of Lehman Brothers Holdings Inc. that ended in June 2009. Brasil Travel Turismo e Participacoes SA canceled its first-time sale in February, citing “unfavorable” market conditions.

BTG IPO

While Locamerica struggled to drum up demand for its offering, Brazil’s IPO market will likely get a lift next week when billionaire Andre Esteves offers shares in his bank, Banco BTG Pactual SA, according to Fausto Gouveia, who helps manage 380 million reais at Legan Administracao de Recursos. BTG Pactual, founded and led by Esteves, and its shareholders are seeking to raise as much as 4.1 billion reais in Sao Paulo.

“It depends from case to case,” Gouveia said by phone from Sao Paulo. “BTG’s IPO next week, for example, should be more interesting as it’s a bank whose business is very well known in Brazil.”

The Bovespa index has gained 11 percent this year, following an 18 percent slump in 2011, boosted by local interest-rate cuts, signs of a stronger recovery in the U.S. and easing concerns about Europe’s debt crisis. The benchmark is down 2.3 percent so far this month as signs of a slowdown in China, Brazil’s biggest trading partner, spurred speculation that demand for commodities exports may falter.

Before Locamerica, Abril Educacao SA was the last company to do an IPO in Brazil, raising 371 million reais with its shareholders in July.

Locamerica plans to use the proceeds to buy cars and boost its cash position, according to the prospectus. The company posted net income of 22.6 million reais in 2011, according to a statement on its website. Competitor Localiza Rent a Car SA, Latin America’s biggest car-rental company, posted a profit of 291.6 million reais last year.

The stock starts trading in Sao Paulo on April 23 under the ticker LCAM3.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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