As LatinFinance went to press, all eyes in the equity markets were fixed on OGX, the oil and gas startup led by billionaire entrepreneur Eike Batista. The IPO was set to launch its roadshow in the last week of the month and heard growing from an originally targeted $2.0 billion to between $3.0 billion and $3.5 billion.
“With oil at $129 this is an extremely interesting deal,” says a New York hedge fund investor looking at the deal. “At that price [per barrel] they should be able to easily execute their projects,” he adds, referring to OGX’s plan to explore seven offshore blocks it won in a government auction in December.
“This is a sizable deal and it will probably do very well,” says one ECM banker away from the transaction. The executive adds that large, liquid deals are being asked for by investors, and should help improve the issuance environment. The buyside in general has been distrusting of new offerings and demanding of substantial new issue premiums. With Petrobras being the only alternative, OGX could be viewed as a good diversification play, says Will Landers, who helps manage $8 billion in LatAm equities at BlackRock.
Bolsa Reopens Itself
The Bolsa Mexicana de Valores (BMV) is scheduled to price a $440 million IPO mid-June. The issue is a significant landmark for Mexican equity markets in the same way the Bovespa and BM&F IPOs were flagship deals for Brazil.
The exchange has been plotting its IPO for over a year, but has taken a long time to reorganize its ownership structure.
Bankers away from the process say IPO preparations were complicated by the dozens of brokerages with BMV stakes wanting to participate in distribution. That could result in a highly atomized book, especially given Mexico’s large retail investor base.
The BMV is heard targeting a PE valuation similar to the BM&F and Bovespa, the latter representing a 2008 PE of 31.8x. But investors and bankers away from the deal say this would be a mistake. The two equity markets are vastly different, especially in trading volume, a key measure for determining valuation. BBVA and UBS are leading BMV.
Elsewhere in Mexico, an IPO for pharmaceuticals distributor Genomma Lab Internacional is heard in the works, targeting a raise above $300 million. IXE and Santander are running the deal locally, with Merrill Lynch and UBS heading the international effort. Up to 184 million shares will be sold, including a greenshoe, or 33% of the capital. Timing should be roughly in line with the BMV.
These two offerings should help boost the Bolsa following the less than cheery departure of Fresnillo in May, which took its £1 billion IPO to London, snubbing local investors. The world’s largest primary silver producer created a hubbub in the run up to pricing, but it came at just 555 pence a share, the low end of the 555-700 range and hit a trough of 502 pence in the first day of trade. The stock took almost two weeks to rise back above issue price.
Fresnillo, a precious metals spinoff from Mexico’s Peñoles, got an equivalent market capitalization of $7.8 billion. Peñoles will hold 75% of the capital stock of Fresnillo, which also applied for a Mexican listing without float.
Some 80% went to UK investors, with the rest bought mostly by US accounts. “The quality of the book was extremely high,” says a banker on the deal. He adds that of the 180 million shares sold, only 5% changed hands in the first day of trade. “This was a deal that was covered, obviously we would have liked it to have been covered more. It’s not an easy climate at the moment but we are incredibly pleased,” adds the London-based banker.
JPMorgan Cazenove had sole books, with Canacord Adams, Citi and UBS as co-managers. Disclosed gross fees were $44.2 million, according to Dealogic.
Among the more surprising developments in late May was an offering by Consultatio, one of Argentina’s largest asset managers and a significant real estate developer. The company was targeting a range of 3.44-3.67 pesos, and set to distribute the shares in the week of May 26. The Buenos Aires listing, which could raise 271 million pesos, is heard aided by JPMorgan and Merrill Lynch for international distribution.
“This is a very interesting development from a timing perspective,” says Christopher Ecclestone, an analyst at Hallgarten, noting the decision to remain in Buenos Aires is particularly notable. A local broker adds that interest in the listing has been strong so far.
Also coming up in Argentina is the $2 billion or more listing of YPF secondary shares, which will constitute a sort of IPO for the oil and gas giant, which today is thinly traded. Spain’s Repsol YPF is divesting its Argentine holdings and is selling a quarter of itself to a private equity group for $2.2 billion, while another quarter is constituting the IPO. Credit Suisse, UBS, Goldman Sachs and Itaú are leading the offering. LF