Equity capital markets (ECM) sources are buoyant over Jose Cuervo’s initial public offering, saying order books were some 4x oversubscribed.

Investors gravitated towards Cuervo’s recognizable brand
name and its sales success in the US and Canadian markets, one ECM banker said.

“If it gets done at a level investors like, then this is a
powerful offering that could lift Mexican markets,” he said.

Becle SA, the holding company that owns Cuervo, was
expected to price the offering late on Wednesday night New York time. Sources
were confident the IPO would get over the line well within the suggested price
range.

The offering could raise as much as MXN17.54bn ($856m), including
an overallotment option, a prospectus on Mexico’s BMV showed yesterday
afternoon. Leads set the pricing range between MXN30 and MXN34 per share.

Singaporean investor Temasek was expected to take up 20% of
the book, while the rest is likely to be taken up by a number of dedicated
consumer retail investors, long-only funds and some local investors, a second
banker said.

“The effect of their branding is not to be undermined,” he
said. “Cuervo could command premium multiples and its reputation is embedded in
its own growth story.”

A third banker said some investors were wary of Cuervo’s
exposure to trade ties with the US market, and expressed concern over potential
changes to the North American Free Trade Agreement (NAFTA).

Almost three-quarters of Cuervo’s sales are in the US, so
increased import costs, generated from the US’ protectionist rhetoric, could
impact the IPO’s valuation, he said. Global investors however, are more likely
to prioritize the level of Cuervo’s dollar revenues, over any increased
tariffs.

Sales in the US increased to 14.8m cases in 2015, compared
to 7.2m cases back in 2002, data from the Distilled Spirits Council of the US
showed.

Sources told LatinFinance
earlier this week that it was in Cuervo’s best interests to complete a transaction,
before any further “Trump volatility” hurt Mexican capital markets.  

JPMorgan, Morgan
Stanley, GBM and Santander are coordinating the IPO.