Minerva aims for Athena IPO in April 2020, eyes risks from Argentina

SAO PAULO (Reuters) - Brazilian food company Minerva SA BEEF3.SA is aiming for an initial public offering (IPO) of its Athena Foods subsidiary in April 2020 despite political headwinds in Argentina, where the division gets about 30% of its net sales.

According to company managers, uncertainty related to Argentina’s economic policies after the election of a left-wing government will be key to determine the fate of the transaction, which was originally expected to raise up to 1.3 billion reais ($310 million).

“If risk aversion continues to be high (in Argentina), the IPO may become inviable,” Chief Financial Officer Edison Ticle told a press conference.

João Sampaio, Minerva’s director of investor relations, said talks with officials of Argentina’s incoming government suggest exporters have no reason to worry.

“They know the internal situation is difficult but they need to bring in dollars. The only way to do this is exporting,” he said.

The resumption of Athena’s IPO plan, ditched after the U.S.-China trade war soured investors’ mood and lowered deal valuations last May, partly reflects positive operating prospects for Brazil’s beef-packers. With numerous new plants approved to export meat to China, local companies are among the most benefited from surging Chinese food imports.

“All of our projections were surpassed,” Chief Executive Fernando de Queiroz said referring to sales, margins and debt reduction goals that were announced before the IPO was originally expected to be priced.

Beforehand one key objective of the IPO was helping de-leverage Minerva, but the goal is now to fund expansion of South American operations, Ticle said.

Athena, which also operates in Uruguay, Paraguay, Colombia and Chile, is a leading South American producer and exporter of fresh beef and cattle by-products, accounting for 12% of beef exports out of continent, according to Minerva data.

In Colombia, which does not yet sell beef to China, Minerva said it will grow through acquisitions to explore new market opportunities.

Regarding overall meat sales China, Minerva expressed optimism as beef becomes a substitute for pork, especially for more affluent Chinese consumers.

Minerva also sees trade prospects improving further should China agree to reduce or remove a 24% import levy on South American meat imports, a move to rein in domestic food inflation.

The matter was discussed during a state visit of Brazilian President Jair Bolsonaro to China, Minerva executives said. Queiroz indicated some state-run Chinese importers have been exempted from the import tariff already.

Reporting by Ana Mano; Editing by Chizu Nomiyama and Lisa Shumaker