Agriculture companies in race for IPO driven by soybean

The skyrocketing soybean prices are making many people rich in the Central-West region of Brazil - and the heart of the financial market in São Paulo does not want to be left out.

Targeting the investor with appetite to bet on one of the most dynamic sectors of the Brazilian economy, smaller agricultural companies are multiplying recently.

The portfolio is still lean at stock exchange B3, with companies like SLC, BrasilAgro and Kepler Weber. But this should change soon.

In a sign that the diversification is about to start, Boa Safra will resume the process for an IPO in coming days. If successful, it will be the first seeds producer in the stock exchange. XP will coordinate the offering expected to raise R$500 million and put the company's valuation at R$1.4 billion.

With revenue of R$600 million, Boa Safra wants investors to bet on the consolidation of the market. The company is one of the largest soybean seeds multiplier in Brazil, but it only has a 6% market share. The ten larger companies in the segment have a 23% market share. In the United States, a more mature market, business leader Pioneer boasts a 27% market share - the three main seeds multipliers control over 60% of the market.

Owner of three seeds processor units - the fourth is being built - Boa Safra wants to use the money raised with the IPO to triple its size, building or acquiring three additional plants to reach the capacity of 8 million bags a year.

Boa Safra is an asset-light company. Contrary to competitors, it does not own land but close partnerships with producers who supply seeds to be processed and later sold to soybean farmers. The company's investments are focused on the plants, each costing between R$80 million and R$100 million.

Like its competitors, Boa Safra licenses biotechnology from giants like Bayer, Corteva and Syngenta and multiplies the seeds. The risks, according to analysts, are the lack of proprietary technology and...

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