June 25, 2022

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Churrascaria Fogo de Chão Debt Relief – Returns to the Stock Exchange with an Eye on the Economy

Steakhouse chain Ground fire Will return to list the shares United States, This time New York Stock Exchange (Nyse), At an initial public offering (IPO) scheduled for the coming weeks. The transaction prospectus – a document with information for investors – specifies the purpose of raising US $ 100 million. This is because the actual size of the offer and the market signal for the price of the paper are still under discussion.

Fogo de Chão, or “fogo-dee-shoun”, was born in Brazil, as Prospectus teaches about the pronunciation of the name, but has not been a Brazilian company for some time. Founded in 1979 in Porto Alegre, it was purchased by the brothers Jair and Arry Koser, Which made the restaurant one of the foremost in the country’s meat and barbecue segment, named for its rotation system.

Still under Brazilian control, the company began its international expansion, focusing on the United States and attracting the attention of investors. Conclusion: After years of negotiations with various interested parties, it was purchased in 2012 by US fund Thomas H Lee Partner for a total of US $ 400 million.

In 2015, with rapid expansion, it made an IPO on Nasdaq and raised $ 88 million. Three years later, it went public and was resold to Rhône Capital for $ 560 million. Now, Phoco Hospitality, the current owner of the steakhouse chain, is going public.

Proceeds from the IPO should be used to pay off the network’s debt, totaling $ 296 million at the beginning of October, an increase of 114% over the previous year.

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Steakhouse Chain currently has 46 cities in the United States and sees the potential to reach at least 300 restaurants across the country in the next 20 years. It has already planted the flag in 14 countries, except the United States. There are seven restaurants in Brazil. By 2022, the announced plan will open eight to ten own restaurants and “one or two” international owners.

The IPO was coordinated by Morgan Stanley, Bank of America, Jeffries, Raymond James and Credit Suisse. The NYSE stock trademark will be “FOGO”.

Negative past

The company will return to the US stock market as it does not have the best experience when trading its shares. At the time of the first IPO the company was trading at around US $ 22 per share, but it has not returned to that level in almost three years of being on the market.

At times, the company began to reduce its market value to 50% of its initial value. By the time he went private, he had recovered a portion of the value and finished his first ticket on the Nasdaq for about US $ 15.

According to Rodrigo Lima, an analyst at Stock, a brokerage firm that specializes in foreign investments, Phoco de Chao will return to the market sooner rather than later, with more balanced debt and strong Eptida growth (interest, taxes, depreciation and deflation). “The company has shown 17% Ebitda growth for the first year of 2016, so I believe this is a great time,” says Lima.

International spread

Brazil’s revenue was only a small fraction, at $ 8.7 million over the same period. Since March 2020, the company has laid off 255 employees without negotiating with the union, accusing the company of not cutting many employees in the country and not generating revenue due to the epidemic – which has become the target of public ministry action. Rio de Janeiro’s Labor (MPT) rescinds decision. This year, however, the Sவோo Paulo Labor Court approved the collective dismissal.

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“Because of the business model focused on the cycle, the company has not been able to renew itself during epidemics. It is very difficult to sell for one application,” says Douglas Carvalho, partner at Target Advisor, which specializes in mergers and acquisitions. “Today, in Brazil, business is much less than it used to be.”

Another aspect that catches Lima’s attention is that the company is returning to the capital market at a difficult time, with a possible fourth wave with Ômicron variation, and a shift in the habits of younger consumers.

According to him, there is more interest in the dishes that are placed on the plate, and the red meat has lost a little space. “The market is penalizing this type of business at the moment, but it’s too early to say whether this outrage caused by Ômicron will continue. My attention is drawn to a risk that millennials are looking for a plant-based menu (plant origin),” says the researcher.

Difficulties in meat

Fogo de Chão debuted on the US stock market in 2015, but in 2018 it was bought by Rhône Capital for US $ 560 million – which decided to list the company.

Although born in Brazil and uses the brand in Portuguese, all communications are based on “Brazilian barbecue”, but Foco de Chao is an American company. Brazil’s revenue is about 3% of the company’s annual revenue, which wants to focus on expansion in the United States and the Middle East.

The fact that the fourth wave of Govit-19 caused by the Ômicron variant will cause new closures, which will have a direct impact on its sales, is a fact that worries researchers.

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The change in the habits of young consumers, who are more concerned with their health, can be a barrier to the company.