Gafisa SA (GFSA3) swung between losses and gains after the Brazilian homebuilder agreed to sell a majority stake in its Alphaville Urbanismo business to a unit of Blackstone Group LP (BX) and a local partner.
The shares slumped 6.9 percent to 3.79 reais at 2:35 p.m. in Sao Paulo, the worst performance on Brazil’s Ibovespa index, after earlier rising as much as 4.9 percent. Trading volume was 3.4 times the three-month daily average, according to data compiled by Bloomberg.
Gafisa agreed to sell a 70 percent stake in Alphaville to Blackstone Real Estate Advisors LP and Patria Investimentos Ltda for 1.4 billion reais ($654 million), according to a regulatory filing today. Sao Paulo-based Gafisa posted unexpected losses in the past two quarters as the company overestimated demand for government-subsidized homes for low-income families.
“The deal allows us to balance the need to raise cash without having to let go of an asset with very high returns,” Chief Financial Officer Andre Bergstein said in a phone interview.
Proceeds will be used to reduce Gafisa’s net debt as a percentage of assets to 53 percent from 94 percent at the end of the first quarter, Bergstein said.
Gafisa separately will pay 367 million reais for a 20 percent stake it didn’t already own in Alphaville, ending arbitration proceedings with the unit’s previous controlling shareholders, according to the regulatory filing.
The company’s agreement to pay for the stake with cash instead of shares could lower the chances of extraordinary dividends for shareholders, according to Credit Suisse AG analysts including Guilherme Rocha.
“This uncertainty over the use of cash could hinder part of the upside for the shares in short-term,” the analysts wrote in a note to clients today.
Alphaville, which focuses on higher-income developments, was an “important” profit generator for Gafisa, Chief Executive Officer Alceu Duilio Calciolari said on a May 13 conference call. The unit accounted for 24 percent of Gafisa’s first-quarter revenue, according to a May 10 earnings report.
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