SAO PAULO (Reuters) -Brazilian software company Totvs has agreed to buy StoneCo’s Linx unit in a deal worth 3.05 billion reais ($547.90 million), it said on Tuesday, adding that it expects the move to strengthen its position in the retail segment.
Totvs has shown interest in Linx since 2020, when StoneCo won a bidding war by paying 6.7 billion reais for the retail software developer. In April, Totvs entered exclusive talks with StoneCo to acquire the unit.
Sao Paulo-traded shares of Totvs seesawed after the announcement, climbing 3.1% early in the session before erasing gains and falling as much as 1%. In the afternoon, the company’s shares were down 0.5%, while benchmark stock index Bovespa was up 0.4%.
Totvs said in a securities filing that the transaction will be financed through its cash reserves and debt instruments yet to be arranged “under favorable market conditions.” The deal requires approval from Brazil’s antitrust watchdog.
Totvs’ chief executive, Dennis Herszkowicz, told Reuters in an interview on Tuesday afternoon that Linx is the company’s biggest-ever acquisition in terms of investment value.
Herszkowicz also noted that it is not yet clear how much of the deal will be financed through the company’s own capital versus debt, although the majority is expected to be funded by debt.
The executive said the deal will strengthen Totvs’ position in the retail sector as the company will gain a foothold in segments where it does not currently operate.
“A good part of what Linx does in retail, Totvs does not do – software for pharmacy chains, gas stations, fast-food chains, car dealerships, and so on,” Herszkowicz said.
He reaffirmed that Totvs is considering other acquisitions in addition to Linx, adding that none of these potential deals would require capital from divestitures.
“While the landscape is challenging for everyone due to politics, geopolitics, and interest rates, technology stands out as an island of prosperity, and management software especially,” he said.
($1 = 5.5667 reais)
(Reporting by Gabriel Araujo and Luciana Magalhaes in Sao Paulo; Editing by Chizu Nomiyama and Matthew Lewis)
