Gávea, Apax eyeing stake in Brazil's Alpargatas, sources say

Private equity firms Gávea Investimentos Ltda and Apax Partners LLC are interested in the 44.1 percent stake that Brazilian conglomerate Camargo Correa SA has in apparel and footwear maker Alpargatas SA, three sources with direct knowledge of the situation said.

Camargo Correa, an engineering firm with investments in cement, toll road and electricity companies, hired Goldman Sachs Group Inc and Banco Bradesco BBI to manage the process, said two of the sources, who requested anonymity because the process remains private.

Apart from Rio de Janeiro-based Gávea and Apax, other buyout firms eyeing the Alpargatas stake include Carlyle Group LP and KKR & Co LP, the same sources added. Another interested party is Brazil's Grendene SA, a rival footmaker controlled by the namesake family, they said.

Camargo Correa's stake in Alpargatas is worth around 1.86 billion reais (323.58 million pounds) at current market prices. Both Goldman and Bradesco expect to receive binding offers in the coming weeks, the same sources added.

Gávea and Apax declined to comment. A spokeswoman for Grendene said that the company "is always looking for opportunities in the segments it operates."

Carlyle and KKR did not have an immediate comment.

Shares of Alpargatas have rallied 25 percent since Oct. 5, when the company said that Camargo Correa was considering a potential sale of the Alpargatas stake. Preferred shares in Alpargatas shed 0.6 percent to 8.48 reais on Thursday.

'COMPETITIVE PROCESS'

The sale comes as Camargo Correa grapples with fallout from a corruption scandal at state-controlled firms, some of them where key clients of the conglomerate's engineering unit. The scandal blocked access to capital markets funding, forcing Camargo Correa and peers to dispose of assets to raise cash.

"The Alpargatas process has turned out to be rather competitive," the first source said.

The conglomerate is under investigation in the so-called "Operation Car Wash," as the scandal is known in Brazil. Recently, the company agreed to sign a 700 million-real leniency accord with prosecutors.

Camargo Correa decided to exit part or all of different business to reduce debt and raise cash to pay some fines related to the scandal. The Alpargatas stake is the first of a series of asset sale plans that Camargo Correa will try in coming months, said the first source.

Analysts argue that, because of its diversified revenue stream and profitable energy and cement businesses, Camargo Correa is in a relatively better financial position than rivals involved in "Operation Car Wash."

If the sale is finalized, holders of Alpargatas common shares could receive 80 percent of the price that Camargo fetched for the Alpargatas stake, the first source added. None of the sources gave an indication of the size of the potential premium Camargo Correa pretends to earn from the sale.

This week, Alpargatas agreed to sell its Topper and Rainha brands to trim costs and improve cash flow.