After Mexico’s pipeline of equity market transactions started to take shape late last year, equities bankers were bullish on the country’s prospects in 2016. Homebuilder Javer is expected to return to the market in January, after the company postponed its initial public offering in December.
Other deals found their opportunity to launch late last year. In November, Mexican airline Volaris raised $170 million in a follow-on offering, while another homebuilder Cadu Inmobiliaria raised about $144 million in a December IPO.
Nonetheless, shares on Cadu’s listing priced at 18 pesos each, well below the target range of 21.50 pesos to 23.50 pesos, leading sources to warn over persistent volatility in the equity markets. On the bright side, the transaction was the first Mexican equity deal to offer shares across the Latin American Integrated Market (Mila) platform.
New avenues for selling stocks, are expected to play a bigger role for equity transactions this year. While Cadu’s Mila allotment is small, it sets a precedent and may encourage issuers to use the platform, an equities banker says.
Another likely source of deal growth this year is Mexico’s “Fibra E” instrument. Designed to boost energy infrastructure development, the Fibra E is similar to a US master limited partnership.
Argentina’s new president Mauricio Macri meanwhile, lifted capital controls in December and equities bankers are hopeful that deal flow will surge in 2016. Hours after Macri’s victory in November, Argentina’s Pampa Energía raised $86 million in a follow-on equity offering.
Brazilians looking for equity capital will face a sharply more difficult path ahead. Just one company — Par Corretora — has listed this year. Offerings from government-controlled lender Caixa Econômica Federal and reinsurance firm IRB Brasil were postponed indefinitely in October, while Petrobras fuel distributor BR Distribuidora’s planned IPO could instead become a strategic sale.
Fire sale
Following the arrest of founding partner André Esteves in November, lender BTG Pactual sold its 12% stake in hospital operator Rede D’Or São Luiz to Singaporean sovereign wealth fund GIC for 2.4 billion reais ($618 million). And in late December it divested a 21.29% stake in Brazilian property firm BR Properties for 463 million reais. It might sell its remaining 14.58% stake in the company this year. The bank is also evaluating the sale of its Swiss private banking arm BSI.
Brazil’s woes have led investors to closely monitor their strategies, an M&A source says. In December, food processor BRF agreed to buy Golden Foods Siam in Thailand for $360 million from Malaysian private equity fund Navis Capital. With growth prospects slowing in Brazil, the company is eyeing expansion beyond its borders. This deal followed BRF’s $140 million acquisition of Qatar National Import and Export Co.’s frozen food distribution arm in November.
US-based DeVry Education Group meanwhile, agreed to buy a 94.6% stake in Brazil’s Grupo Ibmec Educacional for 699 million reais in December. In October, three private equity funds agreed to buy Sociedade Educacional Leonardo da Vinci, a Brazilian distance learning college operator from Kroton Educacional for about 1.1 billion reais.
The tertiary education sector, along with Brazil’s middle class, is growing, and strategic investors like DeVry or institutional funds with long-term ambitions are enamored by Brazil’s education sector, one analyst tells LatinFinance.
Australian renewables firm Pacific Hydro meanwhile, agreed to sell its Chilean and Brazilian hydro and wind assets to China State Power Investment Corporation in December. The Chinese company edged out other bidders after earmarking opportunities to develop a further 600 megawatts of hydro projects and a potential wind facility in Latin America, an M&A source says. The acquisition amount remained undisclosed, but market sources estimate the deal’s worth to be north of $2 billion. LF