Equity Follow-ons Set to Price

Chile’s Cencosud and Brazil’s Brazil Pharma are set to test equity investor appetite through follow-ons pricing today. Bankers, investors and analysts expect follow-ons and some of the larger IPOs to get done. Cencosud is offering 91.3m shares in the form of ADS, a sale that would raise CLP293.06bn ($586m) at Wednesday’s CLP2,791 closing price, assuming the use of a 15% greenshoe. Books are scheduled to close this afternoon, with the pricing available as soon as the evening. The Chilean retailer would then launch a rights offering period to sell up to an additional 138m shares, raising as much as an additional $771m. Though Andean stocks are often considered expensive at the moment, Cencosud is seen offering a low entry point to the LatAm retail sector. Its 17.8x 2012 P/E ratio means it trades at a 13% discount to EM peers, according to a Deutsche Bank report. The supermarket operator is raising funds to pay down debt and to fund the acquisition of Jumbo Retail Argentina, in addition to general corporate purposes. Each ADS would be worth 3 common shares, and initially referenced by ADRs. Credit Suisse, JPMorgan, Morgan Stanley, UBS, Santander and BBVA are managing the deal, done as part of a $2bn total capital increase approved last year. Brazil Pharma is also set to price a follow-on today. The retail pharmaceutical company plans to sell 45m primary shares, and 7m secondary shares owned by members of the Silveira family. This would indicate a BRL571m ($281m) sale, based on Wednesday’s BRL9.55 close, and assuming a 15% greenshoe. A 20% hot issue is also available. Half of the primary proceeds would go to strengthening the issuer’s capital structure, 40% to new acquisitions, and the remainder to making improvements to existing operations. BTG Pactual, Bradesco and Citi are managing.