Exito Shows Colombian Equity Insulation

Colombia’s Grupo Exito got 1.7x demand for its COP2.502trn ($1.40bn) equity follow-on, in a sale that points to Colombia’s relative insulation against the volatility in the broader equity markets. The blue-chip retailer closed its sale period Friday and announced allocations Tuesday, having given the COP21,900 per-share price for the 114.27m shares at launch 3 weeks ago. That the price represented an 8% discount to the COP23,800 average price over the one-month period preceding launch helped Exito avoid the fate of state-controlled oil company Ecopetrol, which opened its own follow-on sale period in July only to see markets tumble and demand fall just short of the target. Shares closed at COP22,800 Tuesday. “Exito is a big company in a country with strong economic growth,” says a banker on the transaction. It is these types of companies that have allowed Colombian equity markets to keep bubbling over at a time when other LatAm activity has ground to a halt. Colombian issuers that have raised equity in the last few months represent leaders in their sectors such as Nutresa, Ecopetrol and Exito. This stands in contrast to the Brazilian pipeline, which contains companies that are further down the quality scale and less likely to interest investors in times of volatility, say bankers on the Exito deal. Meanwhile, Brazil’s TIM Particiapcoes is set to price a BRL1.85bn ($1.01bn), follow-on next week, marking what would be the first deal from hat country since July .But with parent Telecom Italia set to exercise its subscription rights, less than BRL610m worth of shares should hit the market. “It’s going to be very difficult to see many new deals in Brazil before the end of the year,” says a New York ECM banker. Mexico and Chile also have names in the pipeline, but none appear to be close to launching. Credit Suisse, Citi, JPMorgan, and Santander managed the international part of the Exito sale, with Corredores Asociados leading the domestic portion. Proceeds will help fund