Ultra: The initial public offering (A)
Following the sudden death of its longtime owner, Pery Igel, Grupo Ultra was at a crossroads. Around the world, capital markets were booming, with several telecom and technology IPOs. But the Asian crisis of 1998 had made investors skeptical of emerging markets. In Brazil the local index, Bovespa, had suffered considerably that year, going down by 40%. And IPOs had basically dried up across all emerging markets. In 1999 the only equity deals by Latin American companies were a $140 million share issue by Mexico’s Lusacell, a $90 million block of Telefónica del Perú traded, and a $1 billion convertible bond issue by Telmex. Despite this background, the Ultra Group’s businesses achieved strong performance, and there were significant growth opportunities. But capital was a concern. Is the time right to raise resources for expansion? What would it take to convince shareholders to take the company public?
The case shows how: a) corporate governance practices vary across countries, including environments in which there are dual-class shares; and b) corporate governance ensures that managers maximize shareholder value as well as serve the company’s needs and strategy. The case allows for discussion of the links between finance and strategy as well as an analysis of the role of IPOs in emerging markets and opening up capital in a family owned firm.
Ultrapar, Ipiranga Group, Petrobras, Materials, Oil and Gas
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