Gruma Moves to Block Chico Pardo

Gruma plans to use its right of first refusal to purchase a 23% stake of itself owned by Archer Daniels Midland (ADM) that the US agriculture operator had agreed to sell to ASUR chairman Fernando Chico Pardo, Gruma says. The exact pricing and timing remain unclear, but the move is approved by the Mexican tortilla maker’s board and Gruma is readying financing. In a report, UBS sees the 23% stake fetching at least $380m, and, when stakes in additional subsidiaries are included, the deal could reach $600m. Assuming the raising of $600m in debt to pay for the deal, the likely resulting 3.3x net debt/Ebitda would be “not exorbitant, it does take away some of the flexibility the balance sheet had recently gained,” UBS says. “Although the news reduced the possibility of the company delisting, it could add significant amount of debt only to buy its own shares, rather than for additional investments,” Monex says in a report, calling the move “negative.” ADM had agreed in October to sell the Gruma shares to Chico Pardo, as the American group concentrates on other areas. Bank of America Merrill Lynch is advising ADM.