Cencosud Set to Price

Cencosud was set to emerge early this morning with the price for an approximately $500m equity follow-on. The Chilean retailer closed books Thursday afternoon on the sale of 91.3m shares in Chile and New York, and was heard still pricing that evening. The transaction would raise CLP255.2bn ($508m) at Thursday’s CLP2,795.9 closing price, though investors were expecting at least some discount. Though most agree the stock is cheap relative to other large LatAm retailers, the company’s Argentine assets – proceeds from the sale go partially to paying for the acquisition of Jumbo Retail Argentina – were heard to have raised some concern. “For long-term investors this seems like an attractive entry point. It trades at a discount to names such as Exito and Walmex,” says a New York investor looking at the transaction, noting that Argentina raises some concern but is still a small part of the picture. “We consider Cencosud’s current trading level to be very attractive,” Veronica Perez, analyst at BCI, tells LatinFinance. The retailer trades at 17.8x 2012 earnings and 13.9x 2013 earnings, according to Deutsche Bank, meaning a 13% discount to emerging market peers. The bank highlights solid organic expansion, solid brands in compelling markets like Peru and Brazil, as well as defensive features. Following the sale, Cencosud is set to launch a rights offering period to sell up to an additional 138m shares and set aside 27m for employees, all part of a capital raise approved last year. 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 in the New York portion is worth 3 common shares, and initially referenced by ADRs. Credit Suisse, JPMorgan, Morgan Stanley, UBS, Santander and BBVA are managing the deal.