Category: Equity

The somewhat disappointing IPO of Brazil’s Hypermarcas last week bodes ill for the four issuers hoping to bring deals this week, particularly the smaller deals. The consumer goods company closed Friday down 1.7% at BRL16.70, versus pricing at BRL17.00. On Friday, the Bovespa rose 0.6%. The IPO, priced late Wednesday, involved the sale of 35.8m shares, which raised the company BRL608m. Hypermarcas went out with an initial range of BRL20.50-BRL24.50 through Citi and Merrill Lynch, but had to cut it to BRL17.00-BRL21.00 because of pushback from investors. One buysider says he was encouraged by the fact that it got done at all. But it is unclear how investors will react to others teed up for this week. Anhanguera Educacional, an education company is targeting a follow-on of 17m shares to boost liquidity and replenish coffers for capex and acquisitions. The stock closed Friday’s session at BRL26.00, flat to the previous session and 44% above its March 2007 IPO, which came at BRL18.00 Credit Suisse, Merrill and Santander are leading.

Hypermarcas reopened the 2008 IPO market Wednesday with a highly anticipated offering – the region’s first IPO of substantial size since December. The seemingly weak result, however cast some doubt on the strength of the market going forward. The manufacturing and branding company priced its IPO late Wednesday night at BRL17.00, a 25% discount to the midpoint of the originally targeted range of BRL20.50-BRL24.50. That means that without the greenshoe, the company grossed BRL609m. “The fact that they were willing to go down to BRL17.00 after launching it at a minimum of BRL20.50 starts things off on the wrong foot between the seller and its minority shareholders,” says one local portfolio manager who did not participate on the deal. Still, Hypermarcas may have achieved a decent valuation. “At BRL17.00, I still think its rich,” admits the investor, noting the equity value to 2008 Ebitda multiple is 10x, which is substantially better than many comparable companies. Merrill Lynch and Citi led.

Colombia’s Banco de Bogota has priced COP223bn ($109.9m) in 2014 bonds, reflecting strong demand for what was set to be a COP200bn sale. A floating-rate tranche priced at 700bp over the IPC and another came at 300bp over Colombia’s benchmark DTF. A third tranche denominated in the UVR inflation-linked unit priced at a fixed 7%. Proceeds go towards the bank’s capital base. The transaction is rated AA+ by Duff & Phelps Colombia, and managed by Banco de Bogota’s own capital markets unit.

Colombia’s Banco de Bogota plans to sell up to COP200bn ($109.9m) in 2014 bonds today. A floating-rate tranche is basis IPC and another will pay over Colombia’s benchmark DTF rate. A third tranche will pay a fixed coupon of up to 7% and be denominated in the UVR inflation-linked unit. Proceeds will go towards the bank’s capital base. The transaction is rated AA+ by Duff & Phelps Colombia, and managed by Banco de Bogota’s own capital markets unit.

Penoles, the Mexican mining giant, plans to carve out its precious metals unit, to be called Fresnillo, and list it on the London Stock Exchange. The total offering, slated for May, is estimated at roughly $2bn and will include $900m worth of primary shares, say executives close to the process. JPMorgan Cazenove is the lead on what the issuer says will create the world’s largest primary silver producer. The decision to list in London is an unfortunate one for LatAm exchanges like the Mexican Bolsa, or the Bovespa-BM&F, which would have benefited from such a high profile and sizable deal. The latter has made no secret of plans to consolidate LatAm liquidity on a single platform. “The decision to list in London was made a while ago, and based on the fact that other big mining names such as BHP Billiton, Rio Tinto and Anglo American are listed there,” says a banker familiar with the deal. Peru’s Hochschild Mining listed itself on the LSE in 2006, also via JPMorgan. The deal is timed to coincide with record highs for gold and silver, the company’s main metals. “They’re carving it out to realize untapped value in the company,” says a banker close to process. He notes that within Penoles, the operation has a lower multiple than it would on a standalone basis. Citi, Canacord Adams and UBS will be co-managers on the equity deal. Peñoles intends to retain at least 75% of the ordinary shares of Fresnillo plc on completion of the offer.

Brazilian real estate company Helbor Empreendimentos has obtained a BRL700m credit line from Banco Bradesco. The developer, which raised BRL232m in an October IPO, did not provide additional details. The credit will increase capacity to finance developments.

Le Lis Blanc Deux, a Brazilian manufacturer of high-end clothing, launched Monday a roadshow for an IPO expected to raise around $180m. The presentations began in Sao Paulo, and will move to Europe and the US. Le Lis Blanc Deux hopes to sell 26m shares at BRL10.50-BRL12.50 a share. The IPO is surprisingly small, but the issuer apparently wanted to press ahead with the deal and test the waters, say executives close to the process. Small IPOs have fared poorly in recent memory, as investors have demonstrated a strong aversion to low-liquidity stocks. Le Lis Blanc Deux may end up being the third IPO of the year for LatAm. The first was Nutriplant, which debuted on the Bovespa’s small cap index with an $11m IPO. The second may be Hypermarcas, the Brazilian retailer that is on the road with an IPO set to price next week. The company is looking to offer 36m shares at BRL20.50-BRL24.50. Merrill and Citi are leading Hypermarcas, while Merrill and Morgan Stanley have joint books on Le Lis Blanc Deux.

The merger between the Bovespa and the BM&F will be finalized by the end of June, setting the stage for a push into other LatAm markets, Manoel Felix Cintra Neto, the BM&F’s chairman, tells LatinFinance. The executive attributes the rapid integration process to deliberate preparations for the deal on both sides, prior to formal announcement of discussions. “We want to create a center for the liquidity in the region,” says Cintra, adding the idea is to compete on a global scale with other exchanges, such as the US, where a number of liquid LatAm companies are listed. Cintra avoids formulating the expansion as an acquisition spree, though the idea is by no means far fetched, given how other global exchanges have used mergers to gain scale and volume. The merged bourse will be the second largest in the Americas and the third largest in the world, beating the NYSE and Nasdaq in terms of market capitalization, according to Economatica. “We want companies to list themselves in several different places in the region,” says Cintra, noting investors in Chile and Mexico are interested in companies and derivatives products in Brazil, while Brazilian investors would like to invest directly in commodities and companies elsewhere.

Shares in Mexican cement giant Cemex sank Friday following the announcement that Chavez is nationalizing the cement industry in Venezuela, where Cemex has significant presence. Cemex’s ADR traded at $26.32 late Friday afternoon, down 4.22% from Thursday’s close of $27.48. On the Bolsa, Cemex was trading late afternoon at MXP27.81, down 3.94%. The Mexican IPC index was meanwhile off just 0.46%. The Venezuelan president says that he will pay “whatever it takes” to gain control of the cement industry in the country, according to press reports. Cemex was expecting for clarification from the Venezuelan authorities Friday. “We have not been informed of this by the Venezuelan government,” says a Cemex spokesman. “Given that, we are asking for an explanation.” The government blames cement companies for the domestic housing crisis, accusing them of exporting rather than supplying the domestic market, notes Goldman Sachs. The shop adds that the government has also in the past made threatening remarks about the steel and banking industries.

In a year where the thin trickle of ECM flow has been characterized by exceptional cases rather than the usual IPO and follow-on issuers, Citi, which finished in fourth place in 2007, is leading the ECM league tables with three deals and 30.16% of the underwritten deal volume, according to Dealogic. While that dominance is not expected to last very long, it indicates the shop has been busy printing deals to address a gaping hole in its 2007 LatAm franchise. Citi helped bring GP Investments’ $213m follow-on in February alongside Credit Suisse. It then underwrote its parent company’s divestiture of a stake in Brazil’s Redecard in mid-March, while its co-investors in the company chose not to sell. At $724m, that secondary offering is the largest deal to date. And a week later Citi helped Cresud raise $289m in a local rights offering in Argentina. Citi is also slated as co-lead on a $533m deal for Hypermarcas, alongside Merrill. “I don’t think they’ll still be there at the end of the first half,” says an ECM banker at a competing shop. “It’s all a question of when the market comes back,” he adds, noting once that happens, the usual suspects should regain their lead. Last year Credit Suisse and UBS Pactual led the charge by a wide margin, collecting 25% and 18% of the ECM fee pool respectively, according to Dealogic. But it may be awhile before those two regain their 2007 lead positions. A $2bn Gerdau offering scheduled for the last week of April should place JPMorgan and Itau, two other outliers, firmly at the top, with $1bn each in underwriting volume.