By Gabriel Araujo and Tatiana Bautzer
SAO PAULO (Reuters) -Two of Brazil’s biggest shopping mall operators agreed to enter tie-up talks after a revised, higher bid from Aliansce Sonae Shopping Centers SA on Tuesday convinced BR Malls Participacoes SA to negotiate to create a company worth over 12 billion reais ($2.6 billion).
The new stock and cash offer values BR Malls at 8.15 billion reais, considering the closing price for Aliansce shares on Monday. BR Malls shares soared more than 7%.
Considering current revenue for BR Malls and Aliansce Sonae, which are the second- and third-largest listed mall operators in Brazil, the new combined company – which will own almost 70 malls – would be the largest.
The deal is happening as mall operators struggle to compete with e-commerce companies that grew quickly during the COVID-19 pandemic.
The board of BR Malls recommended its management engage in talks with Aliansce after it offered a cash payment of 1.25 billion reais and control of the new combined company to BR Malls shareholders.
They will own a 55.2% stake, the companies said in securities filings, compared with a 51% stake offered in the previous bid.
Aliansce would add to the cash the equivalent of 6.9 billion reais in 326.34 million Aliansce shares to pay BR Malls shareholders.
Aliansce said the new offer included a “more favorable exchange ratio for BR Malls’ shareholders”. The last two Aliansce bids were rejected, but BR Malls had said it would be open to talks if offer terms reflected “fair value”.
Under the new offer, BR Malls shareholders would receive 0.3940 Aliansce share for each BR Malls stock, it noted in a securities filing.
Although the offer reduced the cash payment, analysts considered the chances of reaching a deal improved.
“Considering the closing price of April 18, the new offer provides for an approximate 18% increase if compared to the exchange ratio originally proposed on January 4,” BR Malls said.
Citigroup analysts Andre Mazini and Renata Cabral said in a note to clients the new offer represents a 13% premium over BR Malls’ closing share price on Monday, above the 3.3% premium represented by the previous offer.
“We are now attributing a greater chance of the matter passing than not,” the analysts said.
BR Malls has a market capitalization of 7.2 billion reais, while Aliansce Sonae has a market capitalization of 5.6 billion reais.
Aliansce and BR Malls have some common shareholders, including the Canada Pension Plan Investment Board (CPPIB). The Canadian pension fund owns 28.5% of Aliansce and 10.8% of BR Malls.
Shares in BR Malls were up 7.2% at 9.39 reais in midday trading in Sao Paulo, making it the top gainer on Brazil’s Bovespa stock index, which was down 1%. Aliansce Sonae shares rose 1.5% to 21.51 reais.
($1 = 4.6713 reais)
(Reporting by Gabriel Araujo and Tatiana Bautzer, additional reporting by Alberto Alerigi Jr; Editing by Emelia Sithole-Matarise and Lisa Shumaker)
