Category: Equity

All equity market eyes are on OGX, the oil and gas startup led by Brazilian billionaire Eike Batista. The IPO will grow from an originally targeted $2.0bn to $3.0bn-$3.5bn, say people familiar with the deal, and oil markets remain supportive. As the company awaits the green light from the CVM, investors are getting ready to pounce. “With oil at $129.00 this is an extremely interesting deal,” says a New York hedge fund investor, speaking before crude spiked above $130. “At that price [per barrel] they should be able to easily execute their projects,” he adds, referring to OGX’s plan to explore seven offshore blocks it won in a December government auction. The company may serve as a diversification play away from Petrobras, the only other way to buy Brazil and oil in the same stock, adds another investor who runs an $8bn LatAm equity portfolio. The mood on the investor side generally in LatAm equity remains distrustful and highly selective, says a sell-side ECM head away from the deal. “The overall sense is that it relaxed a bit,” he adds. “The follow-on market is definitely open and while investors will be selective, sizable quality deals will get done,” says the banker, referring to the OGX IPO. UBS, Credit Suisse, Itau BBA and Merrill Lynch are leading OGX.

The Bolsa Mexicana de Valores (BMV), Mexico’s equity and futures exchange, is set to launch an IPO as early as next week, according to people close to the issuer. The peso equity offering – a rare occurrence, many months in the pipeline – could raise $400m-$500m equivalent, and represents a significant landmark for Mexican equity markets – in the same way Bovespa and BM&F were flagship deals for Brazil. The stock market has been taking its time reorganizing its ownership structure, among other things. Bankers away from the process say it was complicated by the dozens of brokerages with stakes in the Bolsa wanting to participate in distribution of the shares. That could result in a highly atomized book, especially given Mexico’s large retail investor base, says a banker at a competing shop. The Bolsa is heard targeting a PE valuation similar to the Bovespa and the BM&F. But investors and bankers away from the deal say that would be a mistake. The two countries’ equity markets are vastly different, especially in daily trading volume, a key measure in determining valuation. UBS is leading the deal, and may be joined by co-managers. Pricing is expected by mid-June.

Carlton Savannah REIT, a Jamaican real estate investment trust, will launch an IPO on the Jamaica Stock Exchange Monday, according to Jason Saunders, executive wealth advisor at NCB Capital Markets, lead manager on the deal. The issuer expects to raise around $17.3m through the offering and seeks to purchase 16 apartments at the Carlton Savannah, a boutique hotel and apartment complex in Port of Spain, Trinidad and Tobago, and pay shareholders with rental income. Carlton Savannah seeks to sell approximately 212m shares, Saunders says, at 5.91 Jamaican dollars per share and redistribute 95% of its income in the form of dividends, which will be taxed 15% in Trinidad but not in Jamaica. A dividend yield of around 6.3% will be guaranteed to investors by the management of the company, Saunders adds. The share offer closes May 30 and so far has attracted several pension funds and corporate clients, Saunders adds.

Brazilian entrepreneur Eike Batista says his growing forestry company Brazilian Forests, or BFX, may be ripe for an IPO in 2009. “We plan to have a land bank of 1m hectares by the end of this year,” Batista tells LatinFinance. The company will conduct sustainable management of forests in Brazil, as well as intensive plantation of eucalyptus to generate biomass and carbon credits, adds Batista. The executive says he plans to employ the same model used for his other companies in the mining, logistics, power generation and oil sectors. This involves luring the best possible talent with lucrative pay packages, then ramping up the business quickly before taking it to market. OGX, the company’s oil and gas outfit, is likely to price an estimated $2bn IPO in the coming month via UBS Pactual, Credit Suisse, Merrill Lynch and Itau BBA. MPX, the power unit, went public in December, while MMX – Batista’s mining company – went public in 2006 and sold a large portion of itself to Anglo American earlier this year for a $5.5bn. (For more of this exclusive interview, see the June issue of LatinFinance.)

Bad news for miners like Penoles, which last week spun off its precious metals unit in a poorly performing IPO, comes in the form of a negative silver price outlook. “We expect silver prices to broadly track gold and the rest of the precious metals complex, but believe its fundamental outlook is likely to weigh on prices, exposing silver to further downside risk,” says Barclays. “The silver physical balance is set to post the largest surplus in over 20 years, in turn, increasing the call on investors to absorb the excess supply,” adds the shop in commodities note. Mine production is expected to ramp up, while industrial demand growth is not seen offsetting a decline in jewellery, photography and silverware. “Given the abundance of above-ground stocks, in our view, silver’s price trajectory is firmly in the hands of investors,” says Barclays. Silver prices are vulnerable to a change in investor sentiment.

SLC Agricola has filed for a primary and secondary share offering on the Sao Paulo Stock exchange. It did not specify the amount of new shares to be offered both in Brazil and to certain international investors, or the amount of existing shares to be sold by holding company SLC Participacoes. Nor did it give an indication of timing, saying only that it expects to launch upon receiving CVM approval. The Brazilian soy and cotton grower raised BRL490m in a July 2007 IPO.

Tivit, a Brazilian provider of information technology and outsourcing services, has filed for an IPO in Sao Paulo. It does not disclose further details or a timetable for the transaction, which will include the sale of global depository receipts in the US. Proceeds will fund expansion and cut debt due in 2010. Credit Suisse is leading the sale, with Bradesco and Morgan Stanley also participating.

Fresnillo’s inauspicious London equity debut adds to the gloom in LatAm ECM, which is headed for significant year-on-year volume reduction. The world’s largest primary silver producer closed 6.3% weaker Friday at 520p after pricing its LSE IPO at 555bp a share – the low end of the 555p-700p target – and hitting a secondary trough of 502p. London stocks meanwhile ended 1% lower Friday, dragged by miners tracking a metals price slide, and US equities were also slightly softer. Fresnillo, a spinoff of the precious metals business of Mexico’s Penoles, raised $1.94bn equivalent after a greenshoe. The unit, which is also a major gold miner, was hoping to raise up to $2.2bn, but bankers blame rocky equity markets and wilting precious metals for the shortfall. However, while silver and gold prices are off the peaks of the year, they are still high versus recent history. The offer comprises 82.89m new ordinary Fresnillo shares and 96.42m existing ordinary shares sold by Penoles, following exercise of an overallotment option, giving it a market capitalization of $7.8bn equivalent. After the deal, Penoles will hold 75% of the Fresnillo capital stock. Penoles expects to bag proceeds net of fees and expenses of approximately $1.02bn. Fresnillo has also applied for a Mexican listing without float. JPMorgan Cazenove had sole books, with Canacord Adams, Citi and UBS as co-managers. Settlement is scheduled for May 14.

An up to $2.2bn London IPO for Mexican precious metals miner Fresnillo is moving ahead and terms are set to emerge today. Fresnillo seeks to sell a total of 160.65m shares in a 555p-700p range via JPMorgan Cazenove, which has sole books. The company is looking to place $900m worth of primary shares, with the remainder in secondary stock, say bankers on the deal, which was heard gaining momentum Thursday. The FTSE closed slightly higher Thursday, driven by mining stocks, while US stocks were also firmer. Also helpful is continued strength in gold and silver prices. Canacord Adams, Citi and UBS are co-managers. Settlement is scheduled for May 14. Penoles intends to retain at least 75% of the ordinary shares of Fresnillo plc on completion of the offer. A listing without float will also be obtained on the Mexican Stock Exchange for Fresnillo.

Brazilian steel producer CSN has announced plans to buy back 10.8m shares on the Bovespa. Currently, CSN has 445m of shares in the market, the company says. The program will run until May 28. Itau, Pactual and Credit Suisse are leading the transaction.