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Brazil's Stone sets price range for IPO

StoneCo Ltd., the parent of Brazilian payment processor Stone Pagamentos SA, registered 54,886,364 class A common shares for sale in an initial public offering at an indicative price range of between $21.00 and $23.00 per share.

At the proposed maximum price of $23.00 per share, the offering's maximum aggregate price would reach about $1.26 billion, according to a preliminary prospectus filed Oct. 16. Sources recently told Valor Econômico that the company was seeking a $1 billion valuation.

StoneCo said it is offering 40,909,091 common shares, while certain selling shareholders are offering an additional 6,818,182 common shares. The selling shareholders have granted the underwriters the right to purchase up to 7,159,091 additional common shares.

Assuming the shares are priced at the midpoint of $22.00 per share, the company estimates net proceeds from the sale of its 40,909,091 common shares to reach approximately $852.8 million.

The company has applied to list the class A common shares on the Nasdaq Global Market under the symbol "STNE."

According to the filing, Berkshire Hathaway Inc. has expressed interest in buying up to 13,712,960 common shares, while entities advised by T. Rowe Price Associates Inc. plan to purchase up to 9,545,455 common shares. Meanwhile, Madrone Opportunity Fund LP, an entity affiliated with StoneCo's current shareholders, has indicated an interest in purchasing up to 2,386,364 common shares.

The preliminary prospectus listed HR Holdings LLC, Madrone Partners LP, Actis 4 PCC, T. Rowe Price Funds and Tiger Global Investors, among others, as the selling shareholders.

StoneCo said it plans to use net proceeds from the offering for general corporate purposes, which may include funding future mergers, acquisitions or investments in complementary businesses. The company does not "anticipate paying any cash dividends in the foreseeable future."

Goldman Sachs & Co. LLC, J.P. Morgan and Citigroup are serving as global coordinators for the offering, while Itaú BBA, Credit Suisse, Morgan Stanley, BofA Merrill Lynch and BTG Pactual are serving as book runners.

StoneCo's adjusted net income increased to 97.6 million Brazilian reais in the first half of 2018 from 18.6 million reais in the year-ago period. The company had a market share of more than 5.5% in Brazil's payment sector as of the second quarter of this year.

As of Oct. 15, US$1 was equivalent to 3.72 Brazilian reais.