Brazilian oil giant Petrobras has said its massive share issue could reach $US79 billion, expanding what was already the largest stock offer in history in a possible sign of strong investor demand.
State-controlled Petrobras said it could exercise a "greenshoe" option to sell an additional 940 million shares to meet extraordinary demand, compared with an original option to sell 564 million shares, as the company raises funds for the world's biggest oil exploration program.
That could be a sign that investors are overcoming concerns about a $US43 billion oil-for-shares swap with the government that is included in the operation ? an arrangement analysts called disadvantageous to Petrobras' private shareholders.
"It's a positive sign. It could mean that there is a big buyer out there like a sovereign wealth fund that has expressed interest," Marcio Macedo, who oversees about $US40 million of assets at Humaita Investimentos in Sao Paulo, said.
public offering by Agricultural Bank of China earlier this year, as well as the $US36.8 billion share sale by Japanese telecommunications company NTT in 1987.
Petrobras preferred shares, the company's most widely traded class of stock, were down 0.23 per cent at 26.30 reais in early afternoon trading on Friday.
The company earlier this month filed to sell 1.59 billion new preferred shares and 2.17 billion new common shares ? figures that do not include the greenshoe option. At Thursday's closing prices, the sale of those shares could fetch 107 billion reais ($US62.5 billion).
The record size of the issue will create a windfall for underwriters, which will be led by Brazil's Banco Bradesco in coordination with Bank of America Merrill Lynch, Citigroup, Itau Unibanco, Morgan Stanley, and Banco Santander Brasil.
The offer will also be co-managed by Brazilian investment bank BTG Pactual and state-owned Banco do Brasil.
Completion of the massive sale is expected to pave the way for stock offers by other companies that did not want to compete with Petrobras, including Spanish energy firm Repsol's planned share offer on Brazilian capital markets.
Greater state control
Access to huge crude reserves buried deep under the ocean floor in a region known as the subsalt and domination of Brazil's rapidly growing fuel markets have made the company's stock a top emerging market pick in recent years.
But uncertainty over the transaction, which was delayed for two months from its original July launch date, has weighed heavily on the company's shares. As of Thursday's close, the stock was down more than 27 per cent this year.
Petrobras will price the offer on September 23, less than two weeks before Brazilians vote in a presidential election that polls say will likely favour Dilma Rousseff, President Luiz Inacio Lula da Silva's anointed successor.
The transaction is expected to increase the state's percentage of the company's total capital, a move that is vigorously backed by Rousseff, who favors a strong government role in the economy.
Critics say greater government interference in a company could upset the delicate balance between state needs and investor interests, a balance that has turned Petrobras into one of the world's most respected state-run firms.
Petrobras has faced scepticism from some investors who questioned the price of $US8.51 per barrel for the reserves to be used in the oil-for-shares swap, a price considerably higher than the $US5 to $US6 per barrel that analysts said was fair.
The share offer will raise money for the firm's $US224 billion, five-year investment plan meant to turn Brazil, which in 2006 became self-sufficient in crude oil, into a major crude exporter.
KAR Price at posting:
$7.71 Sentiment: Hold Disclosure: Held
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