CEF fund undertakes 22% of Brado

Brado Logistics company for rail containers, has a new partner, the Investment Fund for the Rmployee Severance Fund (FI-FGTS), of Caixa Economica Federal. With a contribution of $800 million in the company, the fund now has 22.22% stake in its capital. Controlled by ALL, with 62.22%, Brado also has the participation of Standard Logística, which now gets 15.56%.

With the resources, that strengthen the company, as defined Eduardo Fares, director of ALL industrialized products, Brado intends to leverage its operations in the Brazilian logistics and conquer a space that is currently held by road transport.

Currently, the company is the only independent railroad logistics company – i.e., which does not have concessions – to transport containers by rail in Brazil. Its goal is to quadruple its presence and reach a 12% stake in container shipping market in Brazil. Today, 97% of the volume is transported by road.

One of the possibilities considered to leverage its growth is the acquisition of companies that make complementary services to its railroad logistic network , according to Demeterco José Luis Neto, CEO of the company. Initially, however, the resources should be used for investment in railroad terminals, rail cars and locomotives, according to the executive.

Today this is the destination [of capital], but we will examine more clearly the opportunities we have. We have major events in the industry, such as entry and expansion in Rondonópolis terminals, said, in reference to the expansion of a rail spur in the city of Mato Grosso, which is due to open this month.

Founded in April 2011, Brado was looking for a partner investor for about two years, and the contribution of Caixa was being negotiated for a year. The company was advised by TozziniFreire Lawyers. In this period, the company had been focusing their efforts to turn a project into a profitable enterprise. Now, the $800 million obtained from the new member add up to the $2 billion that the company had already informed that wanted to invest in the next five years. Since it was formed, Brado invested $500 million.

Weighed in the decision of the fund, according to Fabio Cleto, vice president of Government Funds and Lottery Box, the potential return of the company, which he considers high, the experience of its executives in logistics, the fact that ALL is a shareholder and the good results that the company is presenting. Brado has the potential to grow in double digits annually over the next decade, he told to Valor.

Revenue rose 23.4% in the first quarter of this year compared to the same period in 2012, from $110 million to $135 million. The company’s profit increased 18.8% to $4 million, and operating cash flow (EBITDA) increased 18.5% to $ 20.6 million. In transported volumes, the increase was 47.9% in the same comparison, to 392 million tons per kilometer (TKU).

Cleto also said that the management of the FI-FGTS fund considers that Brazil needs logistics operators who can get greater operational efficiency.

Although considered by ALL as its main project at the moment, Brado has negligible participation in the company’s numbers. In the first quarter of this year, accounted for 7.5% of total revenues from ALL of $1.78 billion. The company is expected to raise this number.

According to Fares, the reail transport industry for containers is one of the next major vectors for ALL. He pointed out that Brado has among its advantages the realization of a shipping container for greater security, the fact of being a more competitive and sustainable business. Brado will be increasingly more present in our volume base.

The FI-FGTS fund may make a new contribution in the company if necessary in the future. This if the company exceeds expectations and its managers deem interesting, says Cleto. Today, the fund has invested $48 billion, with about 20% in logistics, including ports, roads, waterways and railroads.

FGTS will make a $800 million contribution at Brado

ALL informed on Wednesday that the FI-FGTS fund will make a capital contribution to its subsidiary Brado Logística e Participações of 800 million.

Thus, as a result of the capitalization, ALL will have 62.22 percent stake at Brado, the former shareholders of Standard Logística will hold 15.55 percent and FI-FGTS, 22.22 percent, according to relevant fact.

According to the document, Brado will invest resources in transport infrastructure and logistics intermodal (rail, road and port), aiming to expand its capacity and increase its market share.
If Brado not make a public offering of its shares, the FI-FGTS can do a swap of its shares issued by Brado by shares of ALL, based on the economic value of the two companies at the date of exchange, the company said.

The possible exercise of this liquidity right by Standard can only occur between April 2014 and April 2016, and the FI-FGTS between June 2018 and June 2020.

In case Standard Logística exercises this swap right there will be an adjustment to the amount paid by FI-FGTS for capitalization.

In this case, the FI-FGTS will start to value Brado at 2.7 billion prefunding and receive shares of Brado enough to spend the entire equity interest equal to 22.85714 percent of its share capital, diluting the other shareholders proportionally, added the relevant fact.

Fonte: Valor Econômico and Reuters