Cosan's lubricants arm seeks to raise up to US$437.5 million (Image: Disclosure)
On the morning of this Tuesday (01), the Cosan (CSAN3) announced that its subsidiary Moove set a valuation target of US$1.94 billion for its initial public offering (IPO) in the United States (USA).
Cosan's lubricants arm and some of its current shareholders launched an offering of 25 million shares and seek to raise up to US$437.5 million, in a range ranging from US$14.50 to US$17.50 per share.
UBS points out that the IPO process helps Cosan's deleveraging process, but does not completely resolve it. The bank recommends purchase and target price of R$26.00 (upside potential of 95.34%).
“Despite a slight improvement in the last quarter, Cosan's debt coverage ratio remains tight at 1.3 times, compared to the 1.5 to 2.0 times level that management signals as adequate. The secondary portion of the IPO helps in the deleveraging journey, as Cosan could raise the equivalent of between 2% and 4% of its gross debt of R$25 billion”, say analysts Luiz Carvalho, Matheus Enfeldt and Tasso Vasconcellos, from UBS .
CSAN3: Interest rates and the wait for Vale (VALE3)
However, for UBS, with interest rates remaining high until 2025, the market expects that extra steps towards deleveraging are necessary, such as a possible reduction of the 4.1% (R$2 billion) stake in Vale (ELECTION 3), which was denied by the company on Monday (30), in a statement to the CVM, or a possible offer from Compass.
“The company has been signaling this possible IPO of Compass, although in this case the local capital market conditions are challenging, particularly considering unresolved issues in the Subida da Serra gas pipeline and the Comgás tariff review.”
According to UBS, the price range per share of US$14.50-US$17.50 would value the company at up to US$1.9 billion in equity (R$10.6 billion) and up to US$ 2.4 billion in market value (R$13.1 billion), which implies an increase in net equity of R$8.2 billion, according to the bank's model. In this estimate, Moove's pricing would be below other global competitors.
Moove offers 6.25 million shares, while other shareholders offer 18.75 million shares for sale. Cosan will remain as the controlling shareholder after the IPO, with a 60.4% stake in the company. JP Morgan, BofA Securities, Citigroup, Itaú BBA, BTG Pactual and Santander are the global coordinators of the offering. Moove will be listed on the New York Stock Exchange (NYSE), with the code MOVE
Moove can grow inorganically
In UBS's assessment, Moove's diversified global positioning is a potential platform for the company to continue expanding via acquisitions, considering the degree of fragmentation in the global lubricants market (more than 700 independent manufacturers hold a share of approximately 50% of the global market ).
“Moove stepped into foreign markets with the acquisitions of Comma (2012) in England, MetroLube (2019) and PetroChoice (2022) in the USA. Now, the company has announced that part of the funds raised will be allocated to the acquisition of R$410 million of Brazilian lubricant manufacturer DIPI Holdings, which according to ANP data has a share of less than 1% of the domestic market. With the offer, Moove seeks to raise up to R$600 million, before taxes.”