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UPDATE 1-Brazil homebuilder Gafisa to sell Alphaville stake
June 7, 2013 / 3:26 PM / 4 years ago

UPDATE 1-Brazil homebuilder Gafisa to sell Alphaville stake

* Blackstone, Patria to pay $657 mln for 70 pct stake

* Deal to help Gafisa reduce debt burden, boost investment

* Gafisa to end up with 30 pct stake in Alphaville

* Expects regulatory approval by end of next year (Adds Gafisa CFO’s comment, company background, share prices)

By Asher Levine

SAO PAULO, June 7 (Reuters) - Brazilian homebuilder Gafisa SA agreed to sell a 70 percent stake of its high-end Alphaville unit to private equity firms Blackstone Real Estate Advisors LP and Patria Investimentos Ltda, Gafisa said on Friday.

Under the deal, Blackstone Group LP and Patria agreed to pay 1.4 billion reais ($657 million) in cash for the stake.

Gafisa, which had held 80 percent of Alphaville, also said it acquired the remaining 20 percent from the company’s founders for 367 million reais, leaving it with a 30 percent stake in Alphaville, its unit aimed at affluent customers.

Gafisa shares jumped nearly 5 percent shortly after market open, before slipping into negative territory later in the session as part of a broader market selloff.

The cash will provide relief for the heavily indebted homebuilder, which has been forced to slash new projects in recent years as operational troubles choked cash flow.

In October 2011, Gafisa embarked on a turnaround after a rapid expansion into unfamiliar markets led to huge cost overruns, sales cancellations, big quarterly losses, and a debt burden among the highest in Brazil’s construction sector.

Selling the stake in Alphaville, Gafisa’s most profitable unit, will help the company reduce its debt-to-shareholder-equity ratio from 94 percent at the end of the first quarter to about 53 percent, according to a securities filing.

Gafisa booked a worse-than-expected first-quarter net loss of 55 million reais last month, compared with a 31.5 million-reais loss a year ago. Much of the loss was due to sales cancellations at its low-cost Tenda unit and mid-range Gafisa division.

“It’s clear that the objective is to increase investment in Gafisa and Tenda,” Gafisa’s chief financial officer, Andre Bergstein, told Reuters on Friday. “We are on the right track for both companies. This resource is just another big push so we can increase investment and increase the speed at which we return these companies to profitability.”

The private equity firms will maintain Alphaville’s management team, the filing said, and Gafisa will hold two spots on the company’s six-seat board.

Gafisa will discuss any potential initial public offering of Alphaville with its new partners at some point in the future, Bergstein added.

The transaction is subject to regulatory approval, which Gafisa expects to occur by the end of the year.

Gafisa shares were down 4.9 percent at 3.87 reais at midday on Friday, off an earlier high at 4.27 reais.

Blackstone shares were up 4.4 percent at $21.93 on the New York Stock Exchange. ($1 = 2.13 Brazilian reais) (Additional reporting by Alberto Alerigi Jr.; editing by Lisa Von Ahn and Matthew Lewis)

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