Category: Equity

The pricing of Cencosud’s $546m equity sale was in line with the company’s expectations, its top officials say, as the Chilean supermarket operator debuts its shares in New York and raises funds for expansion. “To have 6x demand for the offer is extraordinary, especially on a day when the US market fell 250 points” founder and chairman Horst Paulmann tells LatinFinance. “Leaving 6%-7% on the table wasn’t a mistake – quite the contrary. It was in line with our philosophy of live and share,” he adds, noting that as in the retail business, the most important thing isn’t always the lowest price, but rather price with quality. The retailer sold 45.5m shares in Santiago at CLP2,600 ($5.17) each, and 59.5m shares in the form of ADS at $15.61 each, including an overallotment option. The 2,600 price represents a 7% discount to the previous CLP2,795.9 closing price, and did not meet a CLP2,730.3 minimum the issuer had previously indicated. Total demand was CLP1.57trn, with CLP1.08trn in competitive demand. About 47% of the sale went to long-only ADR buyers, with 22% to domestic pensions, 8% to domestic retail, 7% to other local investors, 6% to non-ADR buying foreigners, and the remainder to other investors, the company says. Cencosud is raising funds to pay down debt and to fund the acquisition of Jumbo Retail Argentina, in addition to general corporate purposes. “This will give us the flexibility to grow in the next years. We are very comfortable with the capital increase,” CEO Daniel Rodriguez tells LatinFinance. With no large maturities in the next three years and last year’s $750m international bond under its belt, Rodriguez does not expect new fundraising of any kind in the near future, as the retailer turns its focus to organic expansion. “We see Brazil as a great market. Brazil in the last 4 years in the supermarkets segment has become our biggest operation, and we think in the next 3 years it will offer much opportunity. Our focus will be on organic growth in super

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.

Chile’s Hortifrut is scheduled to begin meeting investors today to market an IPO that could raise around $75m, according to bankers familiar with the process. The exact date of the pricing remains to be determined, with investor meetings likely to last 2-3 weeks. The exporter of berries is selling up to 103.6m primary shares, representing about 29% of the company post-float, in a sale said to target mostly domestic investors. Hortifrut is raising funds for investment in new facilities and export capacity, with an eye on opening new markets in Asia and LatAm. Chilean brokerages Celfin and Penta are managing the sale. Controlled by the Moller family, Hortifrut has growing and distribution operations including LatAm, North America and Europe and is among the world’s largest exporters of blueberries, raspberries, strawberries and blackberries. It posted $22.7m in Ebitda in 2011, up from $13.5m in 2012. While bankers admit the current state of the global markets is challenging for all equity deals, smaller IPOs not depending on international buyers may stand a better chance of completion than larger IPOs. Thursday should see follow-on sales from fellow Chilean Cencosud and from Brazil Pharma, with a number of transactions possibly to follow in the next 4-5 weeks.