* BB Seguridade deal may be world's biggest IPO this year
* Smiles, BB Seguridade IPOs expected to price Thursday
* Successful pricing may boost confidence in Brazil IPOs
By Guillermo Parra-Bernal
SAO PAULO, April 24 (Reuters) - Brazil's BB Seguridade Participações SA could seal on Thursday the world's biggest initial public offering in seven months at a time when confidence in the South American giant has ebbed because of concerns about high inflation and mounting government interference in some sectors of the economy.
BB Seguridade, the pension, annuity and insurance unit of state-controlled Banco do Brasil SA, could raise up to 12.2 billion reais ($6.1 billion) when it prices later in the day, making it the world's largest IPO so far this year, according to Thomson Reuters data. The deal would also be the biggest in global equity markets since Japan Airlines Co Ltd's $8.5 billion listing last September.
A successful pricing of BB Seguridade, which will take place simultaneously with the IPO of the frequent flyer program Smiles, would be a much-needed confidence boost to an IPO market that just a few years ago was one of the world's hottest. Stung by a string of deals that failed to deliver promised returns, investors have for the past two years turned extra cautious on Brazil, casting a dark cloud over a pipeline of some $10 billion of potential IPOs this year.
"Markets have been attentive to the potential of Brazilian IPOs," said David Menlow, president of IPOFinancial.com, a firm specializing in analyzing IPO trends. "If (the country) gets things back on track, activity may become favorable."
Companies might be taking advantage of increased liquidity and demand for higher yielding assets like emerging market stocks to raise funds for expansion, Menlow noted. Only three Brazilian companies held IPOs in 2012, down from 11 each year in 2010 and 2011 and a record 64 in 2007, according to Thomson Reuters data.
April could be the strongest month for IPOs in Brazil since October 2009, when 14 billion reais were raised in two transactions.
Brazilian airline Gol Linhas Aéreas Inteligentes SA hopes to raise up to 1.35 billion reais ($681 million) by listing Smiles. Gol plans to sell at least 30.6 million common shares at between 20.70 reais and 25.80 reais each. An additional 13.5 million shares could be offered as part of the transaction.
A source with direct knowledge of the BB Seguridade deal told Reuters that shares of the insurance giant could be priced between 16.50 reais and 17 reais a piece, near the ceiling of the suggested price. Demand has almost doubled the amount of shares on offer, said the source, who declined to speak on the record because terms of the deal remain private.
Brazil's once-hyped IPO market is slowly rebounding yet not as swiftly as some bankers hoped, as investors remain skittish over the risk of overpriced deals, flagging economic growth and the impact of heavy state interference in some areas of the economy, such as the electricity and banking sectors.
Foreign investors, traditionally the largest buyers of Brazilian IPOs because of their strong shareholding culture, could snap up half the shares on offer of BB Seguridade, the source added. Brazilian pension funds, which have stayed away from IPO hopefuls with poor earnings visibility, an insufficient track record, or vulnerability to a downturn, could participate actively in the deal, the source added.
Both transactions are a boon for local investment banks, which are vying for the largest, most lucrative deals in the Brazilian equity market with foreign counterparts.
Banco do Brasil's investment-banking unit is handling the BB Seguridade deal, with co-managers including Banco Bradesco SA , Itaú Unibanco Holding SA, JPMorgan Chase & Co. Other investment banks working on the transaction include BTG Pactual Group, the largest equity underwriter in Brazil last year, and São Paulo-based Brasil Plural Banco Multiplo.
Gol and Smiles hired the investment-banking unit of Credit Suisse Group. Banco do Brasil, Itaú, Morgan Stanley & Co, Deutsche Bank AG and Banco Santander SA are acting as co-managers.