(Reuters) December 16, 2010 – Raia SA, Brazil’s third-biggest drugstore chain by number of shops, and its shareholders raised 654.7 million reais ($385.1 million) in an initial public offering to fund expansion and reduce debt.

Raia sold 21.9 million new voting shares in a primary offering at 24 reais each, at the top end of the proposed range of 19 reais to 24 reais. The company filed to sell 20.93 million shares, with underwriters having the option to sell 8.3 million in additional stock to meet investors’ demand.

Shareholders including Antonio Carlos Pipponzi, Raia’s chief executive, several members of the Pipponzi family, and private equity fund GIF II Fundo de Investimento sold 5.4 million shares at the same price.

Some 23 companies have raised 149.6 billion reais in initial public offerings and follow-on stock sales in Brazil so far this year, with the bulk of the volume coming from the record-setting 120.2 billion reais Petrobras deal in September.

Nine companies have filed to sell shares in the country in coming months, including five through IPOs.

Founded in 1905 by chemist Joao Baptista Raia in the Sao Paulo countryside, the small-town pharmacy has grown to 326 stores in five of Brazil’s largest states and expects to close 2010 with 350 shops.

Most of Raia’s growth took place the past four years as the company more than doubled in size, racing to add new stores to benefit from a boom in Brazil’s economy and rising family wages which have stoked demand for over-the-counter and prescription medicines.

Part of Raia’s growth was funded with 115 million reais in investments from private equity firms Pragma Patrimonio and Gavea Investimentos, founded by former central bank president Arminio Fraga, each buying a 15 percent stake in Raia in 2008. Gavea manages the GIF II Fundo de Investimento fund that sold Raia stock in the offering.

Raia plans to use 55 percent of proceeds of the offering to open new shops and remodel existing drugstores, with 30 percent of funds going to boost working capital. About 15 percent of the IPO will be used to pay down long-term debt, including 107.7 million reais owed to Banco do Brasil and 20.1 million reais owed to Banco Santander.

By Cesar Bianconi