Cemex Corrals Equity Bulls

Mexican cement giant Cemex has raised $1.63bn in an equity follow-on, upsizing the trade by 8% and scoring what bankers on it characterize as a reasonably tight discount. The fallen blue chip issued the equivalent of 130m of its ADS, up from a planned 120m, at $12.50, selling at a 3.8% discount to the Tuesday close price of $13.00, according to bankers on it. A subscription of more than 3x at the $12.50 level helped it grow, they add. A relatively small discount marks an initial victory for the company, since some analysts and investors had expected the troubled company to settle for a more substantial cut. It remains to be seen how the stock trades. The company’s lead banks have presumably accepted an offer to acquire an additional 15% of the issue as part of their greenshoe option, and that now needs to be traded into the market. “Transactions like this are not the norm, especially in LatAm,” says a sellside executive running the deal. He notes that the company’s global reach, liquidity and repositioning as a turnaround story helped draw a large portion of global and US-oriented accounts, in addition to the usual EM and LatAm dedicated investors. “Some managers are using the deal as an opportunity to return to an equal-weight position in Cemex [from underweight,]” says a LatAm analyst at a bank involved in the trade. This may help explain some of the strong bid for the deal, he adds. Much of the decision-making surrounding valuation appears to focus on the company’s US business, making this offer somewhat of a proxy for a broader view on a US recovery, according to bankers and analysts. Cemex’s own forecast for its US cement business assumes 3 consecutive years of 11% growth, says the analyst close to the deal, adding that he thinks this is overly optimistic and investors should not be including those kinds of numbers into their models. Proceeds are earmarked for repayment of bank debt, of which Cemex has some $15bn coming due by 2014. JPMorgan, Citi, Santander an