Cementos Argos Prices at Low End

Colombia’s Cementos Argos has priced an equity follow-on at the bottom of the range and is expected to raise COP1.648trn ($901m), less than the COP2trn-plus it was targeting. The cement company is selling 214m preferred shares at COP7,700 each, it says in a filing, versus the COP7,700-COP9,300 range set last month. The share total includes 154.7m shares sold to domestic buyers, 27.3m sold to international buyers in the form of ADRs, and another 32m that Argos expects to allocate during a second round. The issuer was authorized to sell up to 250m. The deal was said to receive about 1.5x demand and was heard driven by existing shareholders, though Grupo Argos – owner of 60% prior to the sale – chose not to exercise its rights in the offer. “The price is reasonable, assuming that the use of proceeds produces a return in line with the past. The biggest question is that there isn’t much information about the use of proceeds,” says an equity analyst following the sale. Argos says it plans to use 20% of the funds raised to repay debt, and the remainder for growth, with both organic and expansion and acquisitions possible. How a large acquisition might fit in and perform to match the strong return profile Cementos Argos has enjoyed was the main concern for investors. The case for investment is supported by the company’s track record and Colombia’s massive infrastructure needs. The issuer elected to set a price range for the transaction due to the common shares’ lower liquidity, according to people following the deal. Bancolombia, JPMorgan and HSBC managed the sale, with Bank of America Merrill Lynch, Credit Suisse and Itau as bookrunners. Argos common shares closed at COP8,240 Thursday. The deal was the first equity sale of the year from a Colombian issuer. Attention now turns to Brazil’s Votorantim Cimentos and an IPO expected to launch as soon as this month and raise more than $5bn.