Brazilian technology company TOTVS announced on Tuesday that it signed a legal instrument to acquire 100% of the shares of Linx Participações, owned by StoneCo, for an estimated R$3.05 billion (or US$561 million).
According to local media outlet InfoMoney, the transaction pertains to a portion of Linx’s software businesses, which specialise in retail solutions.
A material fact released by TOTVS showed that the acquisition will be funded with a combination of its resources and new debt to be contracted.
Linx is widely known for its retail-focused software solutions.
In 2024, the company reported total revenue of R$1.145 billion, equivalent to approximately $211 million.
Of that, R$1.048 billion (or $193 million) was recurring revenue, demonstrating the client base’s stability.
Linx also achieved adjusted EBITDA of R$239 million, or $44 million, bolstering its position as a prominent and profitable player in the retail IT sector.
According to Reuters, TOTVS shares in Sao Paulo flcutuated after the announcement, rising 3.1% early in the session before erasing gains and falling up to 1%.
Strategic move for TOTVS
According to TOTVS, the acquisition strengthens the company’s strategy to expand in the retail area, where it aims to replicate the strong presence it already has in other markets.
The move follows the technology platform company’s long-term strategy of developing leader-led vertical integration across industries.
The transaction remains contingent on approval by Cade, Brazil’s antitrust body, as well as other regulatory approvals and the green light by shareholders.
Two shareholders owning a combined 8.82% of TOTVS voting shares have already promised to vote in favour of the acquisition.
“With this acquisition, we will strengthen our position in retail, expanding our portfolio and reinforcing our ability to meet the demands of all types of retailers,” TOTVS CEO Dennis Herszkowicz said in a statement.
In an interview with Reuters earlier this year, Herszkowicz stated that the company was considering other acquisitions besides Linx, and that none of the potential deals would rely on capital from divestitures.
A renewed bid after 2020 loss
Linx was already on TOTVS’ radar, and this acquisition brings back that interest.
TOTVS and StoneCo went to war for control of Linx in 2020, with StoneCo ultimately purchasing Linx for R$6.7 billion, or around $1.23 billion at that time—more than double the current transaction value.
In a 2020 investor presentation by TOTVS (B3: TOTS3), analysts at Goldman Sachs had pointed out possible synergy gains.
During the company’s Q2 2024 earnings call, management re-emphasised that the rationale for the acquisition was solid despite the duration since the original bid.
Outlook and next steps
If authorised, the acquisition will allow TOTVS to strengthen its position as an enterprise technology leader, with a greater presence in retail, one of the sectors likely to experience continuing digital transformation in Brazil and Latin America.
The transaction reflects a larger trend of software consolidation and sector-specific expansion, in which recurring revenue and deep industry expertise are viewed as critical competitive advantages.
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