Volaris Lands IPO at Bottom of the Range

Mexico’s Volaris should raise almost $400m from its IPO after pricing Tuesday night at the bottom of the range. The demand was said to reach more than 1x Tuesday afternoon. The issuer priced its ADS, representing 10 common shares, at $12.00 each, suggesting a $398m size if a 15% greenshoe is used. Volaris was to sell the equivalent of 173.1m primary shares and 115.3m secondary shares, not counting the greenshoe, with about 75% expected to be sold in an international tranche in the form of ADS and 25% in Mexico. The exact breakdown was not immediately available Tuesday night. Though coming at the smaller end of expectations, the deal is completed against an uncertain global market backdrop, at a time when investors are particularly skeptical of airlines. “The market is not great for airlines at this time. Oil prices are very volatile,” says Bianca Faiwichow, an analyst at GBM. A growing middle class and rising incomes offer the potential for increased demand for air travel in Mexico, she says. However, the low-cost business model has not yet proven to be as strong as in the US, as it is more vulnerable to changes in the economies in markets such as Mexico and Brazil. Volaris plans to use proceeds for general corporate purposes and to repay loan debt. Deutsche Bank, Morgan Stanley, UBS, Evercore and Santander managed the transaction, joined by Barclays and Cowen on the international portion. It remains to be seen if Colombia’s Avianca-Taca and Chile’s Latam is encouraged enough to move ahead with follow-on plans, and if the group of Brazilian IPOs in the pipeline chose to launch in the September-October window.