* Carrefour shares initially rise but then fall back
* Brazilian IPO valuation seen in line with forecasts (Updates with latest Bernstein note, adds Morgan Stanley note)
By Dominique Vidalon
PARIS, June 29 (Reuters) - Shares in French retailer Carrefour slipped on Thursday as analysts said its planned $1.7 billion initial public offering (IPO) of its Brazilian business broadly met their valuations.
Carrefour, the world’s second-largest retailer behind Wal-Mart, plans to list the Atacadao business on July 20 on the Sao Paulo exchange with a 15-20 percent free float and an indicative price tag of 15 to 19 reais per share..
This would give the Brazilian arm an equity value of 7.9 billion to 10 billion euros, compared to market estimates of around 9 billion euros ($10.3 billion), analysts said.
Carrefour had already flagged that it was targeting the Brazilian IPO this year to accelerate its expansion in the South American country, its second-largest market after France.
Carrefour shares initially rose but then lost ground to stand 1.4 percent lower at 22.12 euros by mid-afternoon, with analysts signalling that the valuation of the Brazilian business had only met earlier market forecasts, rather than beating them.
“We are valuing Carrefour Brazil at 9 billion euros or 8 times EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation), so do not see the valuation range as surprising,” said Deutsche Bank analysts in a note, keeping a “hold” rating on Carrefour shares.
Analysts at Bernstein, who kept a “market perform” rating on Carrefour, also said that much of the impact from the Brazilian IPO had already been factored into Carrefour’s stock price.
Bernstein analysts said in an updated note that pricing at the top of the indicative range would add 2.5 euros to its ‘Sum Of The Parts’ (SOTP) price for Carrefour, while an IPO at the bottom part of that range would add 0.2 euros to that price.
Deutsche Bank expects the IPO proceeds to strengthen Carrefour Brazil’s balance sheet “by reimbursing gradually between 500 million and 1 billion euros of intercompany debt with Carrefour,” and help fund possible acquisitions in Brazil.
Morgan Stanley said Carrefour’s Brazil business was a strong asset which was likely to attract significant interest from investors.
“One of the potential risks to Atacadao’s equity story, though, is that it might want to rely too aggressively on acquisitions to accelerate its expansion,” added Morgan Stanley, keeping an “equal-weight” rating.
Carrefour added that because of the Brazilian IPO, it was bringing forward its second-quarter sales figures to July 6 from July 12. It will release first-half earnings on August 30. ($1 = 0.8766 euros) (Additional reporting by Sudip Kar-Gupta)