Mexican Hotelier Prices IPO

Mexico’s Hoteles City has priced a MXP2.92bn ($231m) IPO, landing at the bottom of its price range though offering a sign that equity deals can still get done despite the selloffs seen in recent weeks. The Mexican hotel operator is selling 87.0m primary and 34.5m secondary shares at MXP24.00 each, according to people following the sale. The level comes versus a MXP24.00-MXP29.00 price range. The total assumes the use of a 15% greenshoe. About 60% of the deal was expected to be placed in Mexico and 40% internationally, though initial filings indicated an intention to sell more abroad. The secondary share sellers include founders and company officials, as well as investors such as Wamex, the IFC and the IDB. Proceeds from the primary portion will be used for expansion. The operator is raising funds to grow organically and through acquisitions in Mexico, as well as move forward with international plans. City has one hotel in Costa Rica, and has its eye on Peru, Chile and Colombia, according to an investor presentation. It plans to open 29 hotels during the next 24 months. The sale offers yet another equity play on Mexican domestic travel rates increasing along with the country’s economic fortunes, and follows the well-received Fibra Hotel and Fibra Inn real estate funds. Bank of America Merrill Lynch, Citi and Morgan Stanley managed the sale, joined by Actinver on the domestic tranche. The deal was expected to result in a 39% free float. Founded in 2003, City claims to have grown at an average of 34% per year since, reaching 71 hotels throughout Mexico at the end of last year, to make it the country’s third-largest operator. It operates the City Express, City Suites and City Junior hotels. The deal brings Mexico’s new equity issuance to $5.08bn from eight deals this year, compared to $1.49bn from two during the corresponding period in 2012, according to Dealogic data. The $2.73bn from five IPOs is the most ever in Mexico during the first six months of any year. Looking