Gafisa SA, Brazil’s fourth-biggest homebuilder by revenue, led gains on the Bovespa Index after saying it may sell a stake in its Alphaville subsidiary, fueling speculation the company will use the cash to reduce debt.
Shares rallied 13 percent to 4.47 reais at the close of trading in Sao Paulo, the highest price since March 28. The Bovespa rose 1.7 percent.
Gafisa is studying strategic options for the unit, including an initial public offering, according to a regulatory filing yesterday after the market closed. The homebuilder completed the acquisition of Alphaville, which focuses its new projects in the high-income market, this year.
Depending on the unit’s appraisal, “the sale could be a boon” for the homebuilder’s stock, providing “a substantial relief to Gafisa’s leverage,” Marcello Milman, an analyst at the investment bank BTG Pactual, wrote in a note to clients dated today. Gafisa’s debt-to-assets ratio reached 81 percent by the end of the second quarter, according to a regulatory filing.
Alphaville’s previous owners demanded arbitration to determine the price of the residual 20 percent of the company that Gafisa agreed to purchase in June. An independent appraiser set a value of 1.8 billion reais ($892 million) for the subsidiary.
A price that high “might be hard to come by, given current capital markets’ conditions,” if Gafisa decides to sell, Milman wrote.
Gafisa advanced 8.5 percent this year, while the Bovespa added 4.7 percent during the same period.