Contxto – A bidding war may be brewing in Brazil. Almost a week ago, fintech Stone announced it would acquire retail management platform Linx for R$6.04 billion (~US$1.11 billion). But the plot is thickening.
Last Friday (14), TOTVS—a São Paulo-based software company—stated it would offer R$6.1 billion (~US$1.13 billion) for Linx.
Investors, sniffing at the possibility of Stone making a higher bid, resulted in Linx’s shares rising almost 12 percent.
On top of all of that, according to Neofeed, Rede—Itaú Bank’s multi-brand acquirer—is reportedly also preparing an offer to buy Linx.
In any case, Linx’s independent board members will consider TOTVS’s proposal. They have 30 days to do so. Should Linx back out of the deal with Stone, it would face a fine for R$605 million (~US$111 million). Albeit TOTVS also said it’s willing to contest the fine.
Stone’s controverted bid
The Securities and Exchange Commission of Brazil was already analyzing the deal before TOTVS presented its offer.
Nonetheless, the original Stone-Linx deal was highly scrutinized from the start.
Mainly because higher-level Linx executives would receive some large payouts (~US$5.5 million each) for signing non-competes and retention deals. Meanwhile, minority shareholders get the satisfaction of a job well done (as in no payoff).
Interestingly, Stone had originally thought of buying TOTVS, but then went with Linx instead because its customer base aligned more with the fintech’s. Furthermore, Linx and TOTVs had been talking of a merger before Stone showed up to almost steal the show.
Aiming for retailers with Linx
Why are TOTVS, Stone, and Rede launching themselves into a potential bidding bloodbath?
As usual, it’s about addressing a large, often unaddressed market. And that’s because Linx has close links to small businesses and retailers through its management solutions—a market of increasing interest for fintechs.
Linx had been looking to expand into financial services and now it appears it has a growing lineup of interested parties.
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