Petrobras starts international share-offer roadshows

Petroleo Brasileiro SA kicked-off a road-show Thursday for Brazil's largest equity offering to date�the sale of about 153.3 million American Depository Receipts (ADRs) in Petrobras. Sources said that the 2�-week road show for the estimated $4.0 billion offering would start in New York before heading to Canada and Europe.


RIO DE JANEIRO�Petroleo Brasileiro SA kicked-off a road-show Thursday for Brazil's largest equity offering to date�the sale of about 153.3 million American Depository Receipts (ADRs) in Petrobras. Sources said that the 2�-week road show for the estimated $4.0 billion offering would start in New York before heading to Canada and Europe.

The federal government, the controlling shareholder of Petrobras, is offering the shares, which represent 24.3% of voting shares and 14.1% of total capital in the company. Petrobras will not receive any proceeds from the placement.

Petrobras said it expects to list the ADRs on the New York Stock Exchange under the symbol "PBR." The offering will also include a share placement on the Sa� Paulo stock exchange under the symbol "PETR3."

Each ADR represents one common share of Petrobras. Petrobas currently has ADRs trading on over-the-counter markets in New York and is the market heavyweight on the Sa� Paulo stock exchange's Bovespa index.

Separately, the government is selling another minority stake of 16.7%�or 28.24% of voting shares�in Petrobras worth more than 8 billion real ($4.4 billion) to retail and institutional investors in Brazil. The maximum price to Brazil's retail investors is 58 real/share.

In total, the federal government is selling a little more than 30% of its total capital in the company and will net at least $9 billion in the process. It will, however, continue to retain a stake of at least 51% in Petrobras's capital.

The government currently owns an 82% stake in Petrobras.

Success expected
The international ADR offering is expected to be priced sometime during the week of Aug. 1, depending on US Securities and Exchange Commission approval, said a source with the banking syndicate managing the offering. Approval for the requested NYSE listing could take several weeks and is unlikely to happen until the completion of the road-show in early August, he said.

The issue is expected to see great demand from institutional investors in the US and abroad, given that Petrobras is a high-profile company with a solid balance sheet.

Merrill Lynch and ABN Amro Rothschild are the joint lead managers on the global offering. Co-managers for the mammoth sale are Banc of America Securities, Morgan Stanley Dean Witter, Salomon Smith Barney, and UBS Warburg.

The syndicate managers have an over-allotment option of 23.03 million shares. Should this option be exercised, the Brazilian federal government could get an additional $610 million from the share sale, bring the total amount of shares sold to 176.53 million.

The much-anticipated Petrobras global offering and its listing on the NYSE will make its shares more attractive to foreign investors, many of whom have been reluctant to buy the OTC-traded instruments. In addition, an NYSE listing will make the company's accounting standards more transparent, similar to other large US companies, analysts said.

The government has been discussing the sale of the slightly more than 30% stake in Petrobras since the end of 1997. The sale was originally scheduled to take place in 1999, but, like many other privatization efforts in Brazil, it was sidelined by congressional foot-dragging and market volatility. Then in May, a Brazilian senate panel on economic affairs cleared the way for the sale by voting against a bill to block the sale, proposed by Sen. Alvaro Dias of the Democratic Movement Party.

Petrobras reported a net profit in the first quarter of 2000 of 2.299 billion real, compared with a net loss of 1.514 billion real in the first quarter of 1999. Net sales in the first quarter were 9.231 billion real, up from 4.007 billion in the first quarter of 1999.

Based on 1999 consolidated revenues, Petrobras says it is the largest corporation in Brazil as well as the third-largest industrial firm in Latin America. For the year ended Dec. 31, 1999, Petrobras recorded net operating revenues of $16.4 million and net income of $727 million.

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