Canadian pension fund now owns 12.4% of Brazilian Smart Fit gym chain

RIO DE JANEIRO, BRAZIL – Smart Fit, the São Paulo-based largest sports gym chain in Latin America, has been advised by the Toronto-based Canada Pension Plan Investment Board (CPPIB) that, after the processes of stock split and conversion of shares from preferred to common, and the initial public offering of the company held this week, CPPIB became the owner of 12.4% of the shares of the fitness center chain, representing 70.8 million common shares, writes Valor in its latest edition.

Previously, CPPIB held only preferred shares, which also represented about 12.4% of Smart Fit’s capital stock.

With the IPO, the totality of Smart Fit’s capital stock is composed only of common shares.

SMART FIT SHARES SOAR IN B3 DEBUT

The shares of gym chain Smart Fit (SMFT3) rose 34.78% in its B3 debut, closing the day traded at R$ 31.00, after an IPO that moved R$2.3 billion (US$450 million).

Today’s gains raise the fortune of the company’s CEO, Edgard Corona, to about R$1.6 billion (US$313 million), according to estimates by Forbes.

With the base offering, the company offered 100 million shares, diluting Corona’s stake to 9.07%, although the businessman has not sold his stake and remains most probably the company’s second most important shareholder after the Canadians, with more than 51 million Smart Fit common shares. Before the IPO, his stake was 11%.

In 2020, Forbes’ ranking of billionaires estimated the entrepreneur’s wealth at R$1.1 billion, after the network’s profit grew 21.3% in the first half of the year compared to the same period in 2019.

The pricing of Smart Fit’s papers surpassed the midpoint of the indicative price range disclosed in the prospectus, of R$22.50. The demand for the company’s shares was 20 times greater than the volume of shares offered. The offer is coordinated by Itaú BBA, Morgan Stanley, Santander Brasil, BTG Pactual, and ABC Brasil.

The IPO has been part of Smart Fit’s plans since December 2018, when the company demonstrated its intention to list on the Novo Mercado, a segment with B3’s strictest corporate governance rules. In the same year, the company dropped the offer to wait for a better valuation in the future.

The billions raised this week with the offering should be used to finance its organic growth and acquisitions, according to a document sent to the CVM (Brazil’s Securities and Exchange Commission).

CANADA PENSION PLAN INVESTMENT BOARD

The Canada Pension Plan Investment Board (CPPIB) is a Canadian Crown corporation established by way of the 1997 Canada Pension Plan Investment Board Act to oversee and invest the funds contributed to and held by the Canada Pension Plan.

CPP Investments is one of the world’s largest investors in private equity, having invested over US$28.1 billion between 2010 and 2014 alone.

Despite being a Crown corporation, CPPIB is not considered a sovereign wealth fund because it operates at arm’s length from the Government of Canada and solely manages CPP contributions paid by workers and employers, not public funds.

As of March 31, 2021, the CPP Investment Board manages over C$497 (US$395) billion in assets under management for the Canada Pension Plan on behalf of 20 million Canadians.

With information from Valor, Forbes