Volatility has complicated life for the equity buyside and dented market performance in the past year. Long-term investors are still sticking to the consumer demand story.
Category: Equity
Posted inDaily Brief
Alpek Rises after Debut
Mexico’s Alpek traded up Thursday following the late Wednesday night pricing of its MXP10.44bn ($794m) IPO at the bottom of its range. In the country’s first IPO since July, the Grupo Alfa-controlled petrochemicals producer sold 379.8m shares, including an overallotment, at MXP27.50 each, versus a MXP27.50-MXP31.50 range. The shares finished Thursday at MXP27.92, up 1.53%. The deal was oversubscribed, and went 50% to domestic accounts and 50% to international accounts, according to a banker on the deal, contrary to plans for 75% to be sold outside of Mexico. At the low end of the range, the deal implies a valuation of 6.9x-7.3x 2012 earnings, analysts say, compared to Mexichem’s 7.6x and a 7.3x-7.5x sector average. The polyethylene and polypropylene producer, many of whose products are used in the food and beverage industry, is raising funds to repay debt and for general corporate purposes. Credit Suisse, Citi, HSBC and Morgan Stanley managed the sale. The deal was be the first Mexican IPO since BanRegio raised MXP2.09bn in July, and is the second-largest ever IPO on the Bolsa, after OHL Mexico’s MXP11.2bn sale in 2010, according to Dealogic. Larger debut sales from Mexicans, including Fresnillo, GAP and Telmex, were done on foreign bourses as ADRs or GDRs. There are not any other registered upcoming equity deals in Mexico, through a second-ever Fibra real estate trust and an IPO for Santander’s Mexico unit appear to be the most notable deals in the planning stages.
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BTG Trades Up Following IPO
In a widely anticipated trading debut, BTG Pactual shares rose Thursday, along with the Bovespa, supporting the bank’s decision to price the IPO Tuesday at the middle of its price range despite 3x demand. BTG priced 93.6m primary and 23.4m secondary units at BRL31.25 each, versus a BRL28.75-BRL33.75 range. The total includes a 15% greenshoe and about 75% of an 18m share hot issue option. The shares closed at BRL31.45 Thursday. Proceeds are going towards BTG’s expansion. BTG itself was global coordinator, with Bradesco, JPMorgan, Goldman Sachs, Citi and Banco do Brasil as joint bookrunners, and Morgan Stanley, Deutsche Bank and UBS as lead managers. With the Locamerica and Unicasa IPOs on either side of BTG pricing below their ranges, the BTG deal was not expected to have an immediate lifting effect on the Brazilian new issuance going forward.
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Alpek IPO Heard Well-bid
Mexico’s Alpek was due to price late Wednesday a MXP10.44bn-MXP11.96bn ($794m-$910m) IPO, which had been heard oversubscribed. The sale is to be the country’s first IPO since July with the Grupo Alfa-controlled petrochemicals producer looking to sell 379.8m shares, including an overallotment, at MXP27.50-MXP31.50 each. “This is an excellent company, and stands out in Mexico. This should be well-demanded,” says a participating Mexico City-based investor. He says the bottom half of the price range represented an attractive valuation, with the upper half starting to get expensive. Analysts had spotted the valuation at 6.9x-7.8x Alpek’s 2012 earnings, compared to Mexichem’s 7.6x and a 7.3x-7.5x sector average. The polyethylene and polypropylene producer, many of whose products are used in the food and beverage industry, is raising funds to repay debt and for general corporate purposes. Credit Suisse, Citi, HSBC and Morgan Stanley are managing the sale, in which 75% of the shares were marked for international distribution. The deal would be the first Mexican IPO since BanRegio raised MXP2.09bn in July, and could be the largest-ever IPO on the Bolsa. Larger debut sales from Mexicans, including Fresnillo, GAP and Telmex, were done on foreign bourses as ADRs or GDRs. Optimists – rising in number along with the country’s benchmark index and the likelihood of a change in government this year – hoped that the blue-chip deal would pave the way for increased levels of new issuance in Mexico. Santander Mexico is the big name in the pipeline, with others having considered a float including Credito Real, Cinepolis, Volaris and Ideal.
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Brazil IPO Market Returns to Earth
The euphoria from BTG Pactual’s highly-demanded IPO doesn’t appear to have rubbed off on the rest of the Brazilian pipeline, with furniture maker Unicasa Industria de Moveis’ BRL425.6m ($226m) debut landing well below its price range. This has been the fate of many smaller deals from the country in the past two years, as buyers disagree with issuers on price, even if the companies are solid and poised to capture the increasing spending power of the middle class. “This is an interesting company, but faces the same problem as many other small IPOs,” says a New York-based equity investor. “BTG was not like anything else. It will continue to be difficult,” he adds. Unicasa sold 9.1m primary shares and 21.3m secondary shares at BRL14.00 each, according to the CVM, versus a BRL16.50-BRL20.50 price range. The total includes a 15% all-secondary share greenshoe. Unicasa is yet another play on rising incomes in Brazil, selling to all of the country’s income brackets through its Dell Anno, Favorita, New and Telesul brands. It is raising funds for expansion, particularly via its New brand targeting the C class. A portion of the primary proceeds is also marked for paying a dividend to shareholders, according to the prospectus. The secondary shares in the sale were offered by controller Alexandre Bartelle and members of the Zietolie family. BTG Pactual, Itau and Santander managed the sale. The deal should be the last equity sale in Brazil for a while, with no other issuers filed.
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Neuquen Oil Sees Listing
Argentine provincial oil company Gas y Petroleo del Neuquen is planning to hold an IPO by the end of the year, it says. In need of funds to help develop newly certified reserves, it would like to list in Buenos Aires and Toronto. It does not give an indication of how much it would seek to raise in such a transaction, but notes that extracting the resources at the Aguada del Chanar field would require $110m-$120m.
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BTG Upsizes IPO
BTG Pactual has priced a BRL3.66bn ($1.95bn) IPO, pushing on size, but not on price. With demand of more than 3x, the Brazilian bank used 75% of an overallotment option, while keeping the price in the middle of the range. Though sure to be one of the standouts in LatAm this year, it is not clear that the transaction is seen having a reviving affect on the country’s new issuance prospects going forward. “With demand of 3x, they could have priced at the top. But they want to see a sustainable performance in the short-term,” says a Rio de Janeiro-based asset manager. Investors also report the bank’s price range coming below what it had discussed in previous investor meetings. “It is definitely expensive, but there is scarcity value here,” says a New York-based equity investor, noting the lack of comparable financial institutions with the composition of BTG, particularly in the emerging markets. This made the deal difficult to value accurately, with most estimating around 2.5x book value at the middle of the price range, which compares with levels around 2x for other large Brazilian banks. The sale is seen implying a $14bn-$15bn total value for the bank. BTG priced 93.6m primary and 23.4m secondary units at BRL31.25 each, according to the CVM, versus a BRL28.75-BRL33.75 range. The total includes a 15% greenshoe and about 75% of an 18m share hot issue option. The deal was sold 40% to US investors, 40% to Brazilians, 10% to LatAm ex-Brazil, and 10% to the rest of the world, according to a source familiar with the transaction. The units each consist of one preferred and one ordinary share in Banco BTG Pactual, and one common and one non-voting common share in the BTG Pactual Participations offshore entity. The secondary shares were sold by 5 investment vehicles representing the holdings of investment firm JC Flowers and the Rothschild, Agnelli and Motta families. Proceeds will go towards BTG’s expansion. BTG itself was global coordinator, with Bradesco, JPMorgan, Gold
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Fibria Adds Equity Support
Brazil’s Fibria has priced a BRL1.44bn ($766m) equity follow-on, according to the CVM, an all-primary share sale that raises funds to help improve the pulp and paper producer’s capital structure. It sold 91m shares, at BRL15.83 each, representing a 1.1% discount to Tuesday’s BRL 16.00 closing price. The total includes a 15% greenshoe. Though the improving story might still be challenging for some investors, the sale benefitted from a 60% anchor as Grupo Votorantim and BNDESPar exercised their rights and maintain stakes of 30% each. The sale is the entity’s first offering under the new Fibria name, though both Votorantim Celulose e Papel and Aracruz were longtime Bovespa members, and is done to raise funds for repaying debt and general purposes. Itau and Bank of America Merrill Lynch were global coordinators on the transaction, with Banco do Brasil, BTG Pactual, Deutsche Bank and Santander as bookrunners.
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Tenaris Clinches Confab Delisting
Tenaris is to spend BRL1.31bn ($697m) to acquire outstanding shares of Brazil’s confab, reaching the amount it needs to delist its Brazilian subsidiary. The steel tube maker is paying BRL5.90 per common or preferred share to holders of 216.27m shares that accepted a tag along offer, Tenaris says. Outside of the auction, Tenaris also acquired 6m additional Confab shares in the market at the same price.
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BTG Closes Heavy IPO Books
BTG Pactual elected to close books ahead of schedule Monday on an IPO targeting as much as BRL3.5bn ($1.86bn), ahead of pricing today. Books were heard Monday afternoon at more than 3x subscribed. Originally, the investment bank, preparing what could be the region’s biggest equity deal this year, was to close books today ahead of pricing this evening. The heavy order level has some optimistic that the deal could price near the top of a BRL28.75-BRL33.75 range. The range indicates a BRL2.98bn-BRL3.49bn deal size, if a 15% greenshoe is assumed. A 20% hot issue is also available if BTG elects to upsize. “They are asking a high price, but the there are a lot of people who just want a piece of this,” says a Sao Paulo-based equity investor looking at the deal, and expecting it to do well. Valuing the shop that is a combination investment bank, private equity manager, asset manager and other functions has been difficult, as there are few, if any, direct comps available. BTG has been heard describing the price range as implying a 2.2x-2.6x book valuation, while some investors and analysts figure the top of the range would mean more than 3x. The bank plans to sell 72m primary units and 18m secondary units, including a greenshoe made up of 10.8m primary units and 2.7m secondary units. The units each consist of one preferred and one ordinary share in Banco BTG Pactual, and one common and one non-voting common share in the BTG Pactual Participations offshore entity. The IPO will feature a Brazilian portion and an international portion done in Amsterdam. The secondary shares are to be sold by 5 investment vehicles representing the holdings of investment firm JC Flowers and the Rothschild, Agnelli and Motta families, who all bought into the bank through a 2010 private transaction. Proceeds will go towards BTG’s expansion, including international growth, strategic acquisitions and growing commercial banking, private equity and providing of specialized financial products. BTG Pactu