Grupo Sports World, the Mexican health club chain owned by private equity fund Nexxus Capital, plans to price an IPO at MXP18.50-MXP22.00, according to its prospectus. The sale would yield MXP1.13bn, if priced at the midpoint and an overallotment is fully exercised. Books are set to close Wednesday on the sale of 21.6m primary and 26.8m secondary shares, plus a possible 15% overallotment. Santander is leading the deal, with Actinver and Ixe as co-managers. Sports World plans to use proceeds for working capital, including for organic growth and acquisitions. It had MXP447.1m in revenue in 2009, according to the prospectus. Nexxus bought Sports World in 2005, and has taken it to 14 locations from 5. The PE shop would see its stake go to 18.49% from 67.00% if the greenshoe is fully exercised. It would be Mexico’s fourth IPO this year, following grocer Chedraui, grower Proteak and brokerage Actinver. If done at the midpoint, it would be second-largest.
Category: Regions
Sinopec Buys Into Brazil Via Repsol
Spain’s Repsol has sold a 40% stake in its Brazil unit to Chinese oil firm Sinopec for $7.1bn, a high price in line with recent comparables. Repsol had been planning to float the stake, but opted for a strategic sale instead. Adam Waterous, head of global investment banking at Sinopec advisor Scotia Waterous, says the deal provides significant benefit over an IPO, including access to Sinopec’s technical and crude marketing expertise, as well ties to an exploration major. “With an IPO, you’re really only getting the cash,” Waterous tells LatinFinance. The $7.1bn price is seen in line with what Repsol would have achieved in the stock market, say analysts. Repsol’s valuation represents around a 66% premium to the value analysts had assigned earlier in the year. The Repsol Brazil assets have not yet begun producing, and may not for another 2-3 years. Waterous rejects suggestions that the premium is too high, pointing out that the buyer gets minority stakes in Petrobras-managed platforms. A banker away from the deal agrees that the price is not surprising given recent comparables, such as Sinochem’s purchase of a 40% stake in Peregrino from Norway’s StatOil for $3.07bn. Even non-performing assets are achieving healthy multiples thanks to scarcity of Brazil resources, while similar plays in Argentine incur political risk. Additional capex funding will also likely be needed in the future, the banker says. Sinopec is controlled by the Chinese government, which has been aggressive in its pursuit of LatAm oil this year. Sinopec was advised by Scotia Waterous and Vinson Elkins, while Respol was advised by Latham Watkins. The transaction should make Repsol’s plans for a Brazil asset spinoff – expected at $4bn equivalent – unnecessary. It would have been the largest this year in Brazil by a non-government controlled entity. BAML, Credit Suisse, Itau and Santander won the mandate to lead the deal, for which Repsol filed a preliminary prospectus in August. Sinopec is also bidding
CAF Deploys Loans to Panama, Argentina, Brazil
Multilateral bank CAF says it has approved loans for Brazilian electric company Eletrobras, Argentina’s railway system and Panama’s capital. Eletrobras will obtain a total of $500m in the form of an A/B loan. Of that amount, CAF will provide $125m, while the remaining $375m will be a syndicated loan from BBVA, Santander and HSBC. Argentina, meanwhile will get $326m, all from CAF, to improve railroad connections between the northern part of the country and the ports. Lastly, Panama’s capital city will get $120m from CAF to improve the sewage system. Terms for the loans are not disclosed.
Banorte And Ixe Rumored in Pact
Mexico’s Banorte and Ixe are rumored by local press to be in talks about a merger. In a statement to bolsa, Banorte says it is analyzing “different strategic alternatives to continue consolidating its leadership position as one of the most important institutions in the Mexican financial system.” In a separate statement, Ixe says it is analyzing different strategic alternatives as part of a constant effort to maximize the value of the institution. It adds that it wants to boost its competitive capacity in the local market.
Banorte Lends To Oaxaca and Naucalpan
The Municipality of Naucalpan will receive an enhanced loan for MXN486m from Banorte. The loan has a maturity of 20 years and will pay a spread of TIIE plus 175bp. The loan will be used to refinance an existing loan at a lower cost. Moody’s has assigned a debt rating of Aa1 on a national scale. Banorte will also give the State of Oaxaca a MXP250m 10 year enhanced loan, to which Moody’s has assigned a Aa2 rating on a national scale. The loan will pay a spread over TIIE. The loans are payable through trusts, to which the municipalities have pledged the flows of a portion of their federal participation revenues. The ratings actions are based on the underlying creditworthiness of the states and the strong trust structures, as well as estimated cashflows.
Gammon Returns for CapGold
Canada-based miner Gammon Gold has made a new offer to acquire US-based Capital Gold. Both companies operate in Mexico. The deal is valued at $288m or $4.57 per CapGold share. Each common share of CapGold would be exchanged for 0.5209 common shares of Gammon Gold and a cash payment of $0.79 per share. The acquisition has the unanimous support of both companies’ boards, each company says. However, it looks like the offer may run into trouble. US-based law firm Brodsky & Smith has announced it is investigating potential claims against CapGold’s board as it believes the transaction to be unfair given that CapGold’s stock traded at $4.83 September 30, meaning that the current Gammon offer undervalues the company. Also, the offer comes soon after Canada-based miner Timmins Gold, which also operates in Mexico, offered to buy CapGold for $275m. The offer was rejected by CapGold’s board. Gammon’s financial advisors are Dundee Securities and UBS, while CapGold’s is Comark Securities. A previous offer Gammon made for CapGold fell through after Gammon’s share price slid following the deal. The offer, made in March 2009, was valued at $150.5m based on Gammon’s offer of $0.76 per CapGold share. As part of the deal each CapGold share would be exchanged for 0.1028 Gammon shares. On that deal BMO was advising Gammon and Jennings Capital was advising CapGold. On October 1, Gammon’s shares closed at $6.88, down 1.9% while CapGold’s closed at $4.82, down 0.2%.
Upcoming Ecopetrol Bonds Get AAA
Colombian oil giant Ecopetrol plans to issue up to COP1trn ($555m) in local bonds. A company spokesman says that terms have not been set yet and that banks have not been selected. However, Fitch has given the notes a local AAA rating. Ecopetrol has indicated it intends to invest about $80bn by 2020, including $6.9bn in 2010 alone. Fitch says the company has a strong liquidity position and that as of June, it had $3.4bn in cash on hand.
Jamaica Snags IDB Loan
The IDB says it is providing the Jamaican government’s Education Transformation Process with a $60m loan program and expects to provide an additional $30m in 2012. Proceeds will be used to improve education on the island. Terms were not disclosed.
Afores Warm to Infrastructure, Despite Risk
Infrastructure may present an attractive opportunity for conservative investors like Afores, say Mexican market participants. “Risks are unavoidable in any business,” says Juan Antonio García-Gayou Facha, CFO at ICA Infraestructura. “The key is knowing how to mitigate them.” Indeed, risk mitigation is a chief concern among both investors and concessionaires. One potential solution championed by Miguel Martinez, director of project evaluation and financial structuring at IDEAL, is for infrastructure projects to be funded first by development, commercial and multilateral banks during the construction phase. Once project construction is complete, and potential stumbling blocks – such as environmental, social, and usage rights – have been surmounted, pension funds can participate in the operating phase. “The majority of our investors, about 66%, are pension funds,” says Nick O’Neil, COO of Macquarie Infrastructure’s Mexico fund. “Our clients have long-term liabilities” which dovetails nicely with the long-term, and often highly predictable, nature of infrastructure revenues, he adds. Sergio Méndez Centeno, Investment Director for Afore XXI, agrees. “We believe these are very important investments for us.” For Afores, infrastructure still represents a relatively new asset class. While participation in the sector has increased in recent years, investment levels remain far from ideal, according to Martinez. O’Neil says Macquarie mitigates risk for its investors by virtue of its structure as a fund, which aggregates multiple projects, reducing the likelihood of major losses. Macquarie has raised a MXP5bn fund to invest in the country’s upcoming projects, and opened a local office last year. However, the legal framework for project agreements, including matters such as minimum return guarantees, remain a area of particular concern for investors. “All players have to feel comfortable,” says Méndez, particularly when it comes to ensuring that capital costs and investment retur
Mexico’s Fovissste Raises MXP4.5bn
Mexico’s Fovissste has issued MXP4.5bn equivalent in UDI-denominated RMBS. IXE, Banorte, BBVA Bancomer and Bank of America priced the 2040 bonds at Udibonos plus 350bp. The order book was twice over-subscribed. This comes after Infonavit issued MXP1.5bn equivalent in a UDI-denominated RMBS 2038 earlier in the month, which priced at 260bp over Udibonos. Regarding the difference in pricing, a lead banker on the Fovissste deal said it was more generous with spread in order to achieve the desired size.