SAO PAULO, Jan 29 (Reuters) -
Shares of Brazil's Magazine Luiza soared on Monday after the retailer said its board of directors had approved a private capital increase of 1.25 billion reais ($254.23 million) aimed at "optimizing" the company's capital structure.
As part of the transaction, Magazine Luiza's controlling shareholders - the billionaire Trajano family - will inject up to 1 billion reais into the company, while lender BTG Pactual committed to invest up to 250 million reais.
Magazine Luiza's shares jumped more than 9% in early Sao Paulo trading on the news, making it the top gainer on Brazil's benchmark stock index Bovespa, with analysts dubbing the move a positive sign from its controllers.
"It reinforces our perception about the controlling group confidence in the business on a long-term perspective," Santander analysts led by Ruben Couto said in a note to clients.
The move "should improve the company's leverage situation and have a positive impact over financial pressure over the bottom line as the company reduces net debt and interest rate cuts continue in 2024," they added.
Magazine Luiza, popularly known as Magalu, was once a market favorite due to the growth of e-commerce in Brazil but saw its shares plunge more than 90% since late 2020 as the economy stumbled, inflation rose and monetary policy was tightened.
The private capital increase will happen via 641 million common shares priced at 1.95 real each, the retailer said in a securities filing, a 6.25% discout over its Friday closing of 2.08 reais.
The money raised will also be used by the company to speed up investment in technology, including enhancing its marketplace platform.
Magazine Luiza, one of Brazil's largest retailers, has a market cap of 14 billion reais, according to LSEG data. ($1 = 4.9168 reais) (Reporting by Gabriel Araujo, Editing by Louise Heavens and Steven Grattan)
