IPO Report: Atento S.A. (ATTO)

Atento S.A. ($ATTO) is the largest provider of CRM BPO services in Latin America and Spain, and among the top three providers globally, based on revenues. It is headquartered in Madrid, Spain.

Ten other companies are scheduled for the week of Sept. 29, 2014.  The full IPO calendar is available at IPOpremium.

Manager, Co-managers: Morgan Stanley, Credit Suisse, and Itau BBA.

Joint-managers:  BofA Merrill Lynch, Bradesco BBI, BTG Pactual, Goldman Sachs, Santander Co, Baird, and BBVA.

ATTO scheduled a $300 million IPO with a market capitalization of $1.5 billion at a price range midpoint of $20.50 for Thursday, Oct. 2, 2014 on NYSE.  SEC filings

Atento S.A. IPO Report

Overview

ATTO is the largest provider of CRM BPO services in Latin America and Spain, and among the top three providers globally, based on revenues.

CRM BPO = customer relationship management and business process outsourcing.

Valuation

Glossary

CRM BPO = customer relationship management and business process outsourcing

Conclusion

Negative

-$21 per share dilution, 32 times tangible book value

Rev, operating income, earnings, EBITDA all down

Operating income only 2.8% of rev

P/E of -31

Business

ATTO is the largest provider of CRM BPO services in Latin America and Spain, and among the top three providers globally, based on revenues.

ATTO’s business was founded in 1999 as the CRM BPO provider to the Telefónica Group. Since then, ATTO has significantly diversified its client base, and subsequent to the Acquisition in December 2012, ATTO became an independent company.

As the largest provider of CRM BPO services in Latin America, ATTO holds #1 market share positions in most of the countries where ATTO operates, based on revenues for the year ended December 31, 2013, according to Frost & Sullivan. From 2009 to 2012, ATTO expanded its CRM BPO market leadership position in Latin America overall from 19.1% to 20.1% and increased its market share in Brazil from 23.3% in 2009 to 25.5% in 2013, based on revenue.

ATTO has achieved a leadership position over a 15-year history through a dedicated focus on superior client service, a scaled and reliable technology and operational platform, a deep understanding of  clients’ diverse local needs and our highly engaged employee base. Given its growth outlook, Latin America is one of the most attractive CRM BPO markets globally and ATTO believes it is distinctly positioned as one of the few scale operators in the region.

CRM BPO services

ATTO offers a comprehensive portfolio of CRM BPO services, including customer service, sales, credit management, technical support, service desk and back office services.

ATTO is evolving from offering individual CRM BPO services to combining multiple service offerings, covering both the front-end and the back-end of clients’ customer experience, into customized solutions adapted to clients’ needs.

ATTO believes that these customized customer solutions provide an improved experience for clients’ customers and create stronger customer relationships, which reinforces clients’ brand recognition and enhances customer loyalty. Services and solutions are delivered across multiple channels including digital (SMS, email, chats, social media and apps, among others) and voice, and are enabled by process design, technology and intelligence functions.

In 2013, CRM BPO solutions and individual services comprised approximately 23% and 77% of revenues, respectively. In Brazil, the CRM BPO solutions segment grew from 16% of revenue in 2011 to 35% of  revenue in 2013.

ATTO's CRM BPO services and solutions are delivered through an innovative multi-channel platform.

As clients’ customers become more connected and widely broadcast their experiences across a variety of digital channels, ATTO believes the quality of their customer experience is having a significant impact on clients’ brand loyalty and overall business performance.

ATTO's multi-channel platform integrates direct customer outreach through digital, voice or in-person channels allowing ATTO to engage with customers through multiple channels of interaction.

As clients’ customers increasingly transition towards digital communication, ATTO has evolved and invested in digital channel capabilities.

Intellectual property

ATTO believes the “Atento” trademark is a recognized and trusted brand in the CRM BPO services industry in each of the markets where ATTO operates.

ATTO believes it has a strong corporate brand that gives credibility to our products and may offer and facilitate our entrance and growth into future market. This also allows ATTO to attract and retain the best talent, to generate a sense of pride in its staff and to develop a relationship of commitment, confidence and trust with clients. On May 24, 2011, ATTO executed an agreement with Telefónica regarding the assignment of all trademarks and commercial names owned by Telefónica, which included the “Atento” trademark.

Competition

In addition, the trend toward off-shore outsourcing, international expansion by foreign and domestic competitors and continuing technological changes may result in new and different competitors entering ATTO's markets. These competitors may include entrants from the communications, software and data networking industries or entrants in geographical locations with lower costs than those in which ATTO operates.

5% shareholders pre-IPO

Atalaya PikCo S.C.A. 78.3%

Dividend Policy

No dividends planned

Although ATTO expects to be well capitalized following the Reorganization Transaction prior to the completion of this offering and ATTO has sufficient liquidity, its ability to pay dividends on its ordinary shares is limited in the near-term by the indenture governing its Senior Secured Notes, the Brazilian Debentures, the Vendor Loan Note and ATTO's CVIs, and may be further restricted by the terms of any of its future debt or preferred securities.

In addition, under Luxembourg law, at least 5% of ATTO’s net profits per year must be allocated to the creation of a legal reserve until such reserve has reached an amount equal to 10% of issued share capital.

If the legal reserve subsequently falls below the 10% threshold, 5% of net profits again must be allocated toward the reserve until such reserve returns to the 10% threshold. If the legal reserve exceeds 10% of issued share capital, the legal reserve may be reduced. The legal reserve is not available for distribution.

Use of proceeds

ATTO intends to use proceeds from its IPO with cash on hand as follows:

— to repay the entire $31.4 million (at the exchange rate prevailing as of June 30, 2014) outstanding amount due under ATTO’s Vendor Loan Note as of June 30, 2014 and to pay fees and expenses incurred in connection with this offering.

— ATTO will use any remaining net proceeds from this offering for general corporate purposes.

ATTO expects that the selling shareholder will use $108 million of the net proceeds received by it in this offering to repay a portion of its outstanding PIK Notes due 2020.