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ANALYSIS-Busiest year for Brazilian IPOs since 2013 ends on flat note

SAO PAULO/BRASILIA, Dec 15 (Reuters) - Brazil's strongest year for initial public offerings in four years finished on a flat note this week as one company canceled its plans and what promised to be the biggest listing of the year priced at the bottom of the range, showing the limits of renewed investor interest in the country.

Investors were hungry for shares of a Burger King franchisee and plowed enough money into the country's main fuel distributor to raise a combined 7.2 billion reais ($2.2 billion) this week the busiest for new listings in Brazil since April 2013.

Yet the mixed results underscored the finite appetite for new offerings and rising anxiety about an unfinished reform agenda and unsettled political outlook.

Brazil's benchmark Bovespa stock index hit a record-high earlier this year as the economy emerged from its worst recession in decades and President Michel Temer promised a series of market-friendly reforms, opening the best window for share offerings since 2013. Ten IPOs raised $5.55 billion compared to nine issues that raised $8.35 billion in 2013.

Petroleo Brasileiro SA raised 5 billion reais from listing subsidiary Petrobras Distribuidora SA, on Friday but demand was crimped, investors said.

At the bottom-end of the target range, Petrobras Distribuidora's enterprise value equaled around seven times earnings before interest, tax, depreciation and amortization, a common valuation metric known as EV/EBITDA. This was below the 11.4 multiple for private rival Ultrapar Participações SA .

"Of course in a better macro environment, the transaction would have been larger," said a person at the state oil company.

Shares in the fuel distribution unit rose 6.7 percent in their debut to 16 reais, taking some of the sting out of pricing at the bottom of a suggested range of 15 reais to 19 reais.

"Petrobras decided to price it on the low end to get quality investors, long-only funds and not a lot of shorter term hedge funds," said one source with knowledge of the process.

Investor enthusiasm for the offering waned in recent months as it became clear the government would not give up control of the company.

"Political risk is much higher in a state-controlled company, considering the upcoming presidential elections," said one investor who bought into Petrobras Distribuidora.

Uncertainty surrounding next year's wide-open presidential elections has kept a lid on investor optimism.

Neoenergia SA, a power utility controlled by Spain's Iberdrola SA, canceled its IPO planned for Thursday when shareholders refused to cut the price target.

"There was too much supply. Investors do not have the capacity to analyze that many offerings, so they have to make choices," said a partner at a major fund. "This could have been successful if there weren't so much competition."

Banco do Brasil, one of the main shareholders, wanted at least eight times Neoenergia's earnings before interest, debt, taxes, depreciation and amortization. CPFL Energia SA, sold to China's State Grid last year, has a multiple of nine.

The strongest issue was an offering by Brazilian Burger King operator BK Brasil Operação e Assessoria a Restaurantes SA, which priced its offering at the top of the suggested range.

BK Brasil's IPO "offers the only opportunity for investors looking to buy into the rapidly growing fast-food sector in Brazil," said the fund manager.

Burger King Corp, controlled by Brazilian billionaire Jorge Paulo Lemann's 3G Capital through Canada's Restaurant Brands International Inc, owns a 13 percent stake in the firm, which is controlled by investment firm Vinci Partners Ltda, led by former investment banker Gilberto Sayão. Investors also considered 3G's history of efficient management, the fund manager added.

NEXT YEAR

This year's string of IPOs is likely to extend into the first months of 2018 as companies rush to avoid the expected pre-election volatility.

"We expect a smaller volume of share offerings next year than in 2017," said Roderick Greenlees, head of Itaú Unibanco Holding SA's investment banking unit. "As is common in election years, markets will be more active in the first half."

Algar Telecom, which postponed plans last month to avoid being crowded out this week, is planning a January IPO. That may be followed by the listing of payment processor PagSeguro and a follow-on offering from airline Gol Linhas Aéreas Inteligentes SA.

"Investors are selective, but enthusiastic about companies with a good track record of earnings, consistent growth perspective and committed shareholders," said Leandro Miranda, head of investment banking at Banco Bradesco SA.

Foreign investors' stake in Brazilian IPOs is growing slowly and reached around 60 percent in recent transactions, he added.

Investors bought into BK Brasil's strong growth record, which has been higher than local franchisees of rival McDonald's Corp.

Optimism about BK Brasil's expansion prospects lifted its EV/EBITDA to 12.5, a premium compared to rival Arcos Dorados Holding Inc's 8.2 times.

Private fund-tracking figures show Latin American-dedicated funds' allocation in Brazil is below historical levels, suggesting potential to grow even after 10.3 billion reais worth of net inflows into stocks this year.

(Reporting by Tatiana Bautzer in Sao Paulo and Bruno Federowski in Brasilia; Additional reporting by Rodrigo Viga Gaier in Rio de Janeiro; Editing by Brad Haynes and Cynthia Osterman)