The Rio de Janeiro-based company and shareholders raised a total 460 million reais ($291 million) through the sale of the 27.9 million common shares on offer at a price of 16.50 reais each, according to a filing with Brazilian securities regulators.
The price came at the bottom of the suggested price tag of 16.50 reais and 20.50 reais, according to the filing.
The deal comes as other IPOs this year have failed to draw strong interest from foreign investors — traditionally the main buyers of new equity listings in Brazil — due to growing risk aversion, the difficulty of comparing new issues with existing ones a perceived glut of stock in local markets.
Yet, orders were almost twice as big as the size of the offering, a person familiar with the transaction said. Foreign investors, some of them with a specific focus on retail industry deals, bought 40 percent of the deal, the person said.
Part of the reason why the Technos IPO fared better than others, including Monday’s sale of shares by health plans provider Qualicorp (QUAL3.SA), is because the price was cheap relative to other names in the consumer sector.
Investors participating in the IPO said that Technos’ appeal over international rivals was its stunning growth rates — its core business expanded at compounded rates above 40 percent since 2008. That happened partly because more than 20 million Brazilians joined the middle class, boosting demand for apparel and accessories, including watches.
At 16.50 reais, Technos shares were priced to the equivalent of 16 times expected 2011 earnings, compared with 17 times for Swiss watchmaker Swatch (UHR.VX), 22 times for local apparel maker Hering (HGTX3.SA) and 20 times for Brazilian luxury shoemaker Arezzo (ARZZ3.SA), said the person, who requested anonymity .
Technos hired the investment banking units of Itau Unibanco (ITUB4.SA), Goldman Sachs Group (GS.N), Credit Suisse Group (CSGN.VX) and British bank Barclays (BARC.L) to handle the transaction.
According to data by the company, Technos is Brazil’s biggest local watchmaker. Earnings before interest, tax, depreciation and amortization, a gauge of operational profitability known as EBITDA, more than doubled to 66.1 million reais last year from 29.56 million reais in 2008.
About 40 percent of the proceeds from the IPO will be used to fund growth, including acquisitions, and another 10 percent will be used to repay existing debt. The remaining 50 percent of the money will be used to pay for the stake Technos still does not own of its SD subsidiary.
Technos, which was founded in 1956, manufactures Technos and Mariner watches and also markets the Mormaii, Euro and Seiko lines in Brazil.