MEXICO CITY — Lojas Americanas is poised to price a sale of shares worth almost $800 million to open up to 800 stores by 2020, potentially valuing its business at $7.9 billion, said an analyst working at one of the book runners.

“The book is one times covered and the deal is set to be priced this afternoon [Wednesday],” said Ruben Couto of Itau BBA, one of several banks working with lead underwriter Credit Suisse, to draw investors to the sale. “We expect to see a big participation from Brazilian market investors.”

The transaction will see the discount department store issue 152 million shares at a slight discount to its late afternoon trading price of 17.10 reals, or $5.42, potentially garnering some 2.5 billion reals, or $789 million, Couto said.

Despite the apparent interest, Lojas Americanas’ shares have not done too well, falling 3.6 percent year-to-date.

The firm also has a controversial history after reportedly paying 250,000 reals, or $78,000, to Bolivian workers making clothes for its Basic + brand in 2013 to compensate them for “slavelike” conditions.

The follow-on equity sale will dilute management’s holding by 5 percent and include 143 million preferred and 9.3 million common notes, expanding Lojas Americana’s capital to 1.55 billion shares and boosting its value to 25 billion reals, or $7.9 billion, from around 22 billion reals, or $7 billion, currently.

Rio-based Lojas Americanas will use half of the proceeds to pursue plans to open 800 stores throughout Brazil, as revealed in 2014. The plan was put on hold, though, due to the country’s deep recession.

The other half of the funds will go to bankroll the expansion of B2W, its struggling online retail arm running lojasamericanas.com and submarino.com, Couto said.

According to regulatory filings, Lojas Americanas was able to open only 185 of the planned 800 doors, leaving 615 more to roll out.

The 87-year-old company, which is majority controlled by Brazilian billionaire Jorge Lemann, has 1,127 stores dotting São Paulo, Rio, Recife and Uberlandia, according to its web site. It sells more than 60,000 items a year with major market shares in lingerie, health and beauty.

The sale will reinforce the firm’s capital structure so that it doesn’t have to take on additional debt, which some analysts said runs higher than other Brazilian non-food retailers.

“Given the deterioration of their brick-and-mortar operations due to the difficult macroeconomic scenario, the issue will reinforce their capital structure so that they don’t depend on additional financial debt,” Cuoto said.

Lojas Americanas, whose fortunes have gradually improved this year, also is also said to be eyeing acquisitions. One firm on the radar is online footwear retailer Netshoes, as well as Via Varejo, an appliance chain that has also drawn interest from Chile’s Falabella.

Meanwhile, rival Brazilian department-store chain Renner intends to issue $93 million in bonds to finance expansion of its 400-strong chain, one analyst confirmed, adding that plans are still at an early stage.
Analysts said other fashion retailers, witnessing improving trade amid signs that Brazil’s economy is turning around from its four-year downturn, could move to float additional shares.

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