Category: Equity

Santander Mexico has priced a MXP52.81bn ($4.11bn) IPO, according to sources familiar with the transaction, coming at the midpoint of its price range and delivering Mexico’s largest-ever equity debut. With heavy demand, the issuer could have priced at the top of the range, but left breathing room for investors, many of whom saw fair value at the lower end. In the largest equity sale in LatAm since 2010, the bank priced 1.69bn secondary shares, assuming the exercise of a 15% greenshoe, at MXP31.25 each, versus a MXP29.00-MXP33.50 range. Investors appeared to get their wish of a discount to peer Banorte, with the midpoint seen implying about 10x-11x 2013 price/earnings versus Banorte’s 12x. “This is a high-quality bank and has better operating metrics than Banorte,” says a participating EM portfolio manager, noting low operating costs, and high efficiency and profitability versus the system. “They could have priced at the top of the range, but this is a smarter level. They leave something for investors,” says an ECM banker away from the deal, noting this was a must considering the challenging nature of LatAm new issuance this year. The deal, said to be multiple times oversubscribed values the bank at more than $17bn, and was to be divided into 1.18bn shares in the form of ADRs, representing about 80% of the total transaction, and a Mexican portion made up of 294m shares. The floating of a nearly 25% stake in the Mexican unit will allow the Spanish parent to shore up its finances. Santander now plans to IPO its other major subsidiaries, including Argentina’s Santander Rio. Investors receive exposure to the fourth-largest bank in a system expected to see strong credit growth as Mexico’s economy grows. Santander, UBS, Deutsche Bank and Bank of America Merrill Lynch were global coordinators on the transaction. Barclays, Citi, Credit Suisse, Goldman Sachs, Itau, JPMorgan and RBC were joint bookrunners. Santander, Banamex, BBVA Bancomer and HSBC managed the domestic portion

Santander Mexico is hoping recent supportive signs in the equity markets translate into a successful IPO, when it prices the highly-anticipated MXP49.01bn-MXP56.61bn ($3.72bn-$4.30bn) deal this evening. The well-regarded bank is heard with a book multiple times oversubscribed, with both bankers and investors citing strong equity funds flows last week following European Central Bank and US fed announcements as a positive sign. The close of a $5.17bn tender for shares of Brazil’s Redecard could also mean excess funds looking for reapplication to LatAm financial stocks. As with all equity deals, though, investors say it will come down to price. “The market is ready and people will be receptive. This could be expensive, but Mexico is expensive,” says a London-based EM portfolio manager looking at the deal. Most investors see a pickup to Banorte, the closest publicly-traded comparable, with Banorte trading at 12x 2013 price/earnings and Santander seen offering 10x-11.5x at the price range it gave at launch. “Given the interest, they can price at the top of the range. It is a good banking franchise, but we like to see a margin of safety,” Maclovio Pina, senior equity analyst at Morningstar, tells LatinFinance. His shop finds fair value at MXP29.00 per share, at the low end of the MXP29.00-MXP33.50 price range, a valuation hinging on the bank’s ability to control its main cost pillars while its balance sheet expands going forward. Valuing the bank at more than $17bn, Santander will offer 1.69bn secondary shares, including a 15% greenshoe. The deal is divided into an international tranche of up to 1.18bn shares in the form of ADRs, representing 80% of the total transaction, and a Mexican portion made up of 294m shares. Bankers away from and on the deal say the region’s new issue markets need a well-bid sale pricing at the midpoint or higher followed by strong aftermarket performance to have a hope of opening up the market wider for other new deals. However, even a very succ

Mexichem has received shareholder approval for the issuance of new stock, it says, paving the way for its planned equity follow-on. The transaction is awaiting launch, and expected to do so as soon as this month ahead of a likely October pricing. The Mexican industrial conglomerate’s approval covers an issue of 260m shares, an amount that would raise MXP16.06bn ($1.25bn) at Wednesday’s MXP61.77 closing price. Citi, HSBC, JPMorgan and Morgan Stanley are managing the transaction. The equity sale follows the raising of $1.15bn in the international bond market earlier this month. The offering of 10 and 30-year bonds received $17bn in orders.