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Petrobras eyes up to 22 billion reais valuation in distribution unit IPO

[SAO PAULO] Brazilian state-controlled company Petróleo Brasileiro SA will seek a valuation of up to 22 billion reais (S$9.2 billion) for its fuel distribution unit in what is expected to be the country's biggest initial public offering of the year.

Petrobras, as the company is known, will offer a 25 per cent stake in its BR Distribuidora SA unit in an IPO set to price on Dec 13, according to a regulatory filing.

The offering could grow to a 33.75 per cent stake in the distribution unit if the company sells all additional and supplementary allotments.

At the high end of a suggested price range of 15 reais to 19 reais per share, Petrobras would fetch as much as 7.5 billion reais with the offering, a key part of its plan to sell assets and reduce the biggest debt load among major oil companies.

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The local investment banking unit of Citigroup Inc will act as lead underwriter. Bank of America Corp, Banco do Brasil SA, Banco Bradesco SA, Banco Itaú BBA SA, JPMorgan Chase & Co, Morgan Stanley and Santander Brasil SA will also underwrite the transaction.

The long-awaited BR Distribuidora IPO would cap a revival in equity listings in Latin America's largest economy, where the benchmark stock index hit a record high last month.

Renewed demand for emerging market assets, investor confidence in President Michel Temer's efforts to balance the budget and a nascent economic recovery have fostered demand for Brazilian assets following the deepest recession in a century.

The BR Distribuidora IPO is one of several expected to close in the final weeks of 2017 as companies rush to avoid expected market volatility ahead of a wide-open presidential campaign next year.

In August, Petrobras injected 6.3 billion reais of fresh capital into BR Distribuidora in a bid to clean up its balance sheet and attract investors. The move solved a long-standing dispute with state-controlled power utility Centrais Elétricas Brasileiras SA, which had been the biggest hurdle for an IPO.

Last month, Petrobras announced that BR Distribuidora swung to a profit of 620 million reais in the first nine months of the year, compared to a loss of 367 million reais in the same period of 2016.

REUTERS

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