Stone acquires Linx in Brazil’s largest M&A deal of 2020

In August, renowned Brazilian payment solutions unicorn Stone announced its intention to acquire Linx, Latin America's largest software company, for approximately R$6 billion ($1.1bn), in what – after an improved offer of R$6.8 billion was tendered - now stands as the largest Brazilian M&A deal of the year.  

The merger, which is currently pending approval before Brazil’s competition authority, is set to create a new division for Stone and consolidates a trend which has been taking place in Brazil's financial markets. With the advent of open banking and Pix, Brazil’s new instant payment system, Stone is set to combine its payment solutions division with digital software operations, thus improving client experience, promoting innovative solutions for digital retailers and simplifying the structure of e-commerce in Brazil.

In mid-August, Stone raised $1 billion by issuing new shares at Nasdaq via a follow-on to finance Linx's acquisition. With combined annual revenues of over R$3.6 billion, the new company would have the capacity to handle R$300 billion in payments per year, according to Stone’s official forecast. 

In recent months, minority shareholders had raised questions about the regularity of the transaction, as it remained conditioned to the approval of both companies’ boards as well as antitrust authorities, Brazil's Securities and Exchange Commission (CVM) and the United States' Securities and Exchange Commission (SEC).

"Stone improves client experience, promotes innovative solutions for digital retailers and simplifies the structure of e-commerce in Brazil"

On November 17th, however, Linx’s shareholders approved Stone’s improved offer of R$6.8 billion during an extraordinary general assembly with 55.95% voting for the company’s sale and 20.01% voting against it. With the approval of Linx shareholders, the deal is now awaiting approval from Brazil’s competition authority, although Stone has already stated it does not expect the transaction to generate antitrust concerns.

With regards to advisors, Stone is currently represented in Brazil by Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados, Spinelli Advogados and Davis Polk & Wardell LLP, whist Linx is represented by Pinheiro Neto Advogados, TozziniFreire Advogados and White & Case LLP. As for its financial advisors, In the United States, Goldman Sachs is currently advising Linx, whilst J.P. Morgan and Morgan Stanley are providing counsel to Stone. 

“Stone was born eight years ago with a very strong purpose to help Brazilian entrepreneurs prosper via the offering of innovative products and exceptional client service, provided by an extremely talented team which always places clients first and helps Brazilian entrepreneurs transform their dreams into reality. We are very happy to join forces with Linx on this path to transform retail in Brazil,” stated Thiago Piau, CEO of Stone. 

By: François Le Grand