BM&FBovespa Tumbles on Speculation Offer for Cetip Will Increase

  • Cetip rejected $2.7 billion proposal to merge with exchange
  • Offer undervalues its business, the fixed-income platform said

BM&FBovespa SA, the operator of Brazil’s stock and derivatives exchange, slumped on speculation it will have to boost its $2.7 billion takeover offer for Cetip SA after its management rejected the bid as too low.

Shares of BM&FBovespa declined 2 percent to 11.56 reais at the close of trading in Sao Paulo, after falling as much as 3.7 percent, the most since Oct. 14. Cetip dropped 1.2 percent to 37.05 reais, leaving the stock 5 percent below BM&FBovespa’s offer price.

The 10 billion real offer isn’t fair and undervalues the business, Cetip said Thursday night on a regulatory filing. BM&FBovespa, which declined to comment Friday, on Nov. 13 offered 39 reais in cash and stock for each Cetip share, 2.1 percent above the stock’s closing price on the last trading day before the proposal was announced.

"The premium was considered low," said Felipe Silveira, an analyst at brokerage Coinvalores in Sao Paulo. "Now, BM&FBovespa is expected to make a new offer."

The proposed takeover would extend BM&FBovespa’s dominance in Brazil, where it runs the country’s main securities and derivatives exchanges and its stock indexes are the benchmark for global investors. BM&FBovespa has sought to diversify its business in recent years by expanding into fixed-income assets as stock trading volumes slump, but the market for debt securities remains dominated by Cetip.

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