UPDATE 2-PDG, Agre shares erase gains after early rise

* Shares fall on broader market tumble, paring early gains

* Goldman, brokerages praise PDG’s Agre takeover

* Deal to create Brazil’s largest builder
(Adds details on deal, analyst comments)

By Guillermo Parra-Bernal

SAO PAULO, May 4 (BestGrowthStock) – Shares of Brazilian real
estate developer PDG Realty fell in early afternoon trading on
Tuesday, wiping out earlier gains triggered by its plans to
take over smaller rival Agre in deal that would create the
nation’s largest homebuilder.

Shares of PDG Realty (PDGR3.SA: ) gained as much as 4 percent
in early morning trading to 17.10 reais and Agre (AGEI3.SA: )
surged as much as 1.7 percent to 8.29 reais, after analysts
said the combination could create a giant with 29 billion reais
($16.6 billion) in property to develop and potential launches
of as much as 7.5 billion reais this year.

But both stocks reversed course after global equity markets
sank on concern a sovereign debt crisis afflicting Greece is
spreading to Spain and Portugal. Stocks in Europe plummeted
while U.S. Treasury debt yields fell, in a move that indicated
investors are exiting riskier markets to seek refuge in the
safest securities. [ID:nN0472600]

In Brazil, the benchmark Bovespa stock index (.BVSP: ) fell
2.7 percent to 65,281.20, the lowest level since Feb. 10. The
VIX index (.VIX: ) — a gauge of global risk aversion — jumped
22 percent on Tuesday in a sign that markets are under heavy
stress over the euro debt crisis, traders said.

“The markets liked the PDG Realty-Agre deal in a general
tone, but global sentiment about the Greek crisis is dragging
things along,” said a trader who declined to be quoted by
name.

Agre was down 4.3 percent at 1 p.m. local time (1600 GMT),
and was trading at 7.8 reais. PDG slid 1.7 percent to 16.17
reais.

Agre debuted on Monday on the Bovespa.

PDG Realty will issue 148.5 million new shares to pay for
the acquisition, valuing the transaction at about 2.54 billion
reais ($1.46 billion) based on Tuesday’s share price. The
merger is subject to consent by shareholders of both companies
and to regulatory clearance.

“Agre adds strategic land bank, management expertise, and
potentially more stock liquidity to PDG,” Goldman Sachs analyst
Leonardo Zambolin said in a note to clients.

“PDG adds scale, better operating and efficiency controls,
and strong financial expertise to Agre,” he added.

The deal underscores PDG Realty’s increased scale after
focusing on low-income housing, Brazil’s fastest-growing
segment of the real estate market.

PDG Realty Chairman Gilberto Sayao, a former UBS Pactual
banker, is spearheading efforts to expand in Brazil’s northeast
and the state of Sao Paulo, the country’s wealthiest, as the
government extends guarantees to carry out an ambitious housing
plan.

Under terms of the agreement, Agre shareholders would get
0.495 new share of PDG Realty and would own 28 percent of the
combined company.

Spanish entrepreneur Enrique Banuelos, Agre’s largest
shareholder, would own about 6 percent of the combined company,
while PDG Realty’s largest shareholders, including Vinci
Partners and BlackRock, would control about 4 percent each,
Credit Suisse said in a report on Tuesday.

Stock Market Report

($1=1.755 reais)
(Additional reporting by Elzio Barreto in Sao Paulo; Editing
by Jeffrey Benkoe and Tim Dobbyn)

UPDATE 2-PDG, Agre shares erase gains after early rise