Aval Prefers Domestic Equity Route

Colombia’s Grupo Aval is preparing to sell COP2.4trn ($1.27bn) in shares through an equity follow-on in the domestic market, it says. Given the conglomerate’s recent M&A activity, such a sale had been expected by the markets, though perhaps through the SEC process for which it registered earlier this year. The plan to issue in the US market will be postponed as Aval focuses first on this local sale, a spokeswoman says, noting that banks have not yet been hired. Aval does not give additional details. Corficolombiana, part of Aval, would be expected to manage the deal, as it did Aval’s last domestic equity transaction along with Corredores Asociados. A tap of the more familiar domestic investor base, where Aval can anchor with preemptive rights, might allow for the issuer to better control its pricing, say ECM bankers observing the process. “This announcement is a negative for Aval’s shares. Further, given the high trading and forward multiples of [Aval] today, the primary market could demand a considerable discount,” Credicorp says, noting a need for funds to support a busy M&A agenda. Aval completed in April the purchase of BBVA’s Horizonte Colombian pension operation for $530m, and is working on closing the $411m purchase of Guatemala’s Reformador and the $646m purchase of BBVA Panama, both expected to finalize as soon as November. An equity sale might be good for Aval’s bondholders, however, Credicorp says. “The recent M&A activity was constraining severely Grupo Aval’s unconsolidated cash position. This issuance then will improve the conglomerate’s financial health, and lowers the likelihood of further debt offer,” it says. Aval’s last equity deal was a $1.17bn-equivalent domestic follow-on in 2011. It had been seeking the SEC deal since, but has been content funding itself in the international bond market, including $1.6bn last year and $500m this year through its Banco de Bogota subsidiary. JPMorgan, Goldman Sachs, Citi and Morgan Stanley had been hired in asso