Stoneco announced on Tuesday (22) and other smaller software assets for Totvs () by a equity value total of R $ 3.41 billion – composed of R $ 3.05 billion in enterprise value plus Linx’s estimated liquid cash of R $ 360 million. In addition to cash value, Stone will maintain the fiscal goodwill (R $ 3.8 billion) generated by the original acquisition of Linx, which will continue to be amortized over eight years.
He considers the positive transaction for Stone, as it puts an end to an acquisition that has not been able to deliver the expected synergies. Although the final amount of R $ 3.41 billion is well below R $ 6.7 billion paid originally (including EARN-OUTS) and 54% below R $ 3 billion, the broker believes the price is reasonable in the current context-especially since Stone is focused on capital discipline and portfolio simplification. Negotiated at Nasdaq, Stone’s assets rose more than 5% during Tuesday afternoon, while Totvs operated among light gains and losses.
Stone had already recognized a value reduction of R $ 3.6 billion, partially reflecting this loss of value. With this transaction, Stone monetizes a non -essential asset, strengthens its cash position and can now focus more intensely on its main operations.
The financial institution also points out that the value of the business represents about 15% of Stone’s current market value (about R $ 20 billion), and funds can be directed to repurchase shares and dividends, as the company currently serves the three pillars of its capital allocation strategy.
Bradesco BBI also positively values the announcement, as the sales price was slightly above the market expectation of R $ 3.0 billion, reaching R $ 3.2 billion, in addition to the retention of R $ 360 million in liquid cash and R $ 3.8 billion in goodwill.
The BBI also points out that the sale of R $ 3.2 billion involves 79% of the software unit revenue, or 71% of the unit’s profitability. Finally, the bank believes that the completion of regulatory approvals for the transaction with Totvs can take at least 6 months due to its complexity.
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Bradesco BBI has maintained a purchase recommendation for Stone, with a target price of $ 15.
The direction of purchase for TOTVS
Goldman Sachs comments that this acquisition by TOTVS was already widely expected after a sequence of company news and communications – especially after the resumption of negotiations exclusively on April 25.
Regarding strategic rational, Goldman highlights the complementarity between product portfolios in the retail segment, which allows cross-selling and up-selling opportunities through the TOTVS distribution network-thus increasing the company’s presence in customer operations. “TOTVS also sees the opportunity to sell cloud infrastructure to Linx’s customer base, as well as general and administrative and administrative spending synergies (SG&A).”
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Finally, Goldman Sachs that Totvs hopes to generate $ 1 billion in goodwill (goodwill) with the transaction. In Brazil, this amount can be amortized for tax purposes, and M&A (mergers and acquisitions) operations often result in some tax benefit.
Goldman Sachs reiterated neutral recommendation for Totvs, with target price of $ 42.50.
For active investments, the movement makes sense, reinforcing the positioning of Totvs in retail, bringing opportunities for cross-selling and up-selling and acting with a complementary portfolio. “Linx complements Totvs in segments with pharmacies, building materials stores, vehicle dealers, fast food, gas stations and fashion, complementing the segment of wholesalers, supermarkets and restaurants that Totvs already operates,” says the broker.
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In terms of valuation, TOTVS has paid a 12.8 times EBITDA to Stone by Linx, while Stone negotiates EBITDA 3.0 times and TOTVs itself negotiates 15.5 times EBITDA. In active’s view, the paid price was advantageous for both TOTVS and Stone. It is worth remembering that Totvs and Stone have already disputed the acquisition of Linx by 2020, with Stone winning and paying $ 6.7 billion.
