Brazilian companies hear the siren call of the American stock exchanges

SAO PAULO, Dec 22 (Reuters) – Pharmaceutical company Blau Farmaceutica SA, which listed its shares on Brazil’s B3 stock exchange (B3SA3.SA) in April, opened its first plasma bank in the United States and may consider moving its head office and stock exchange listing to the United States.

The company (BLAU3.SA), which is currently based in the Brazilian state of Sao Paulo and, until now, has mainly focused on business in Latin America, intends to open 10 plasma dos in the United States. United in addition to its new location in Florida. . Once the expansion is complete, Blau may consider moving its headquarters to the United States.

In an interview with Reuters, Blau’s chief financial officer, Douglas Rodrigues, said international investors, unlike those in Brazil, are used to the business models of pharmaceutical companies, including those engaged in plasma-based medicine.

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Blau is one of many Brazilian companies considering moving to the United States and listing on a US stock exchange, a trend fueled by a desire for broader access to investors, lower corporate taxes, more flexible regulations for controlling shareholders and better dynamics of capital markets.

The shift shows how the success of U.S.-listed tech startups — including digital lender Nubank (NU.N) — has spurred interest from Brazilian companies in other sectors, ranging from retail to cosmetics, to move their legal domicile, primarily in the United States. but also to other places such as Great Britain, Ireland and the Netherlands.

Banco Inter SA (BIDI3.SA), backed by SoftBank, web services provider Locaweb (LWSA3.SA), retailer Lojas Americanas (LAME3.SA) and cosmetics manufacturer Natura & Co (NTCO3.SA) companies that have announced such measures. .

Brazil’s JBS SA (JBSS3.SA), the world’s largest meat processor, also said it will continue a US listing of its international operations next year.

On Tuesday, Brazilian aircraft manufacturer Embraer SA (EMBR3.SA) unveiled an agreement with ad hoc company Zanite to list its electric flying taxi subsidiary on the New York Stock Exchange (NYSE). Embraer shares soared on the news. Read more

The exit of Brazilian companies represents a growing risk for B3, which is beginning to look for ways to stem it, as well as for local fund managers who may find their investment universe restricted.

Lawyers, bankers and executives, however, expect the trend to continue for now, although they stress that it will be largely limited to companies with significant overseas operations. They don’t expect a rush of companies for releases.

“Some Brazilian companies want access to a larger and more diverse investor base,” said Alessandro Zema, head of Brazilian operations at Morgan Stanley.

They also want to take advantage of generally higher valuations abroad.

Shares of Natura & Co, which has announced plans to swap its primary listing of B3 on the NYSE, are trading at a price-earnings multiple of around 29, compared to 41.5 for rival L’Oreal SA (OREP .PA).

Banco Inter, which first listed on B3 in 2018, is trading at just over 12 times its book value, about half that of rival Nubank, which debuted on the NYSE this month. -this. Read more

Companies listed outside of Brazil seek markets with more comparable companies as well as higher valuations, said Jean Marcel Arakawa, corporate lawyer at Mattos Filho in Sao Paulo, citing asset managers Patria Investment Ltd (PAX .O) and Vinci Partners Investments Ltd. (VINP.O) as examples.

Tech companies often decide to redomicile because venture capitalists tend to prefer to complete funding rounds using offshore holding companies. Another reason is to incentivize founders or controlling shareholders to stay at the helm by allowing them to own shares with special and higher voting rights.

For example, founding partners of 3G Capital, including tycoon Jorge Paulo Lemann, will remain strong players at Americanas SA (AMER3.SA) after the retailer merges with Lojas Americanas and goes public in the United States. Banco Inter’s controlling shareholders, the Menin family, will occupy a similar position within the digital bank.

NEW RULES

Until recently, Brazilian companies could not locally list receipts of their shares listed abroad through Brazilian Certificates of Deposit (BDR). Some decided to drop out of the local exchange, causing B3 to lose initial public offerings and trading fees to the NYSE and Nasdaq.

Brazil’s securities watchdog, CVM, has changed this listing rule, prompting companies such as Nubank and investment broker XP Inc to list their BDRs on B3. These BDRs saw huge trading volumes in their early days.

“We are trying to meet business demands as they change,” said Flavia Mouta Fernandes, B3’s chief regulatory officer.

Brazil has also tried to relax regulations governing majority shareholder ownership of shares with superior voting rights, although Fabiano Milane, corporate lawyer at Stocche Forbes in Sao Paulo, said local regulations are not still not equivalent to those of other countries.

“Companies that are already listed cannot use the super-vote, and the extraordinary voting rights are temporary,” Milane said.

Frustration over the perceived lack of predictability in Brazil’s legal system is another reason why big companies choose to redomicile, says Luis Semeghini Souza, lawyer and founding partner of Souza, Mello e Torres in Sao Paulo.

Some bankers, however, doubt that the current migration of companies will become a long-term trend.

“I think the universe of companies that could relocate is maybe 5% of companies in B3, mostly those that have or intend to have significant overseas operations,” said Roderick Greenlees, head of global investment bank at Itau BBA.

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Reporting by Tatiana Bautzer and Carolina Mandl Editing by Paul Simao

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