The process of selling Linx by Stone began in recent days, with about 20 potential buyers signing confidentiality agreements to evaluate the asset, sources familiar with the matter told Brazil Journal.
Interested parties range from strategic players, especially software companies, to private equity funds.
According to one source, Totvs is not among the interested parties, contrary to what has been reported in the media — although they may enter the process later on.
The sale is being advised by JP Morgan, which is handling the communication with the strategic players, and by Morgan Stanley, which is focused on the financial players.
In the pitchbook sent to interested parties, Stone said Linx is expected to generate an EBITDA of over R$ 300 million this year, compared to R$ 244 million last year.
According to one source, Stone is aiming for a base multiple — “for the start of conversations” — of 15x EBITDA — which would result in a valuation of R$ 4.5 billion.
Last year, Stone received an unsolicited proposal from Linx at a valuation around 12x — but declined the approach.
If sold at 15x EBITDA, the value of the sale would still be lower than what Stone paid for Linx in 2020. At that time, the company paid R$ 6 billion for the asset — 90% in cash and 10% in stocks — in a competitive process involving Totvs.
The multiple would also be low by global standards, where companies in the same sector as Linx, and with less growth, are trading at 20x to 30x EBITDA. “Linx itself has traded at 20x before the acquisition by Stone,” said one of the sources.
The company expects to start receiving non-binding proposals as early as October.
Stone decided to sell the asset after realizing that the integration of Linx with its financial services operation was more complex than initially thought when the acquisition was made.
Currently, the two companies only have back-office integration — but nothing has been done in terms of support, sales, and systems.
“They are very different sales and support cycles,” said one source. “And given that Stone still has a long way to go in the financial services part, such integration would create an unnecessary distraction.”
Stone also realized that they could achieve the same benefit of the sale in a ‘bundle’ without having to carry the asset on the balance sheet — for example, by partnering with a software company.
In the sales process, Stone will highlight that Linx is the only ERP and POS software company with relevance in more than 10 segments in Brazil — from retail to gas stations — and a strong presence in Mexico and Argentina.
“It is a very powerful platform for anyone looking to develop a thesis of consolidating software companies in Latin America,” said a source close to the company.
Stone is valued at $3.85 billion on the Nasdaq. The stock doubled between October and December last year, but this year it corrected and is up 7.5% in the last twelve months.
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Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
