Becle SA has priced what is sure to be one of Latin America’s
largest initial public offerings in years, raising MXN18.64bn ($912m) in its
Jose Cuervo spin off.
The tequila maker’s international appeal, strong US and
Canadian sales and projected growth was enough to attract a number of investors
from both Mexico and abroad.
After stalling
on the IPO last October, leads raised MXN5.85bn locally, while international
accounts made up MXN12.78bn. Both tranches include over allotment options.
The shares sold for MXN34 apiece, the top of a suggested
range that bookrunners released last month. Approximately 172.1m shares were sold
to Mexican accounts and a further 376m went abroad.
Orderbooks were understood to be 8x oversubscribed, equity
capital markets sources said. Books steadily built up throughout the day, after
being seen 4x over on Wednesday afternoon.
“The books exploded and the fact it priced at the top end
shows how well it was received,” one banker said.
A second banker monitoring the transaction said orders came
from a number of long-only Mexican funds and investors focused on consumer and
retails sectors.
“Investors would have noted the brand vale of Cuervo and
its competitive positioning within the spirits space,” the second source said. “This
is a strong indicator for after- market performance.”
Singaporean investor Temasek took up 20% of a book that
comprised a heavy portion of shares in a primary offering, something of a boon
to investors, the first banker added.
“Investors are more assured of the stock when it is a
primary offering,” he said. “It gives more security that there won’t be an
overhang of stock and gives investors comfort because you know the stock is
trading on fundamentals, rather than a party simply exiting the company.”
Cuervo’s IPO comes amid a tense time for Mexican trade
relations with the US. Since clinching victory in November’s US presidential election, Donald Trump has threatened to revise NAFTA and slap heavy tariffs on Mexican companies that export to the US.
The Mexican peso tumbled 12% the day after the Republican
nominee clinched victory and this year-to-date (YTD), the Mexican Bolsa de
Valores is only up 2.8%, compared to Brazil’s BM&FBovespa, which has jumped
8.8% YTD.
With almost three-quarters of its sales in the US and Canada,
Cuervo remains exposed to any protectionist rhetoric that comes from its northern
neighbor. But with the largest IPO out of Mexico since autopart manufacturer Nemak
in June 2015, investors have shrugged off any uncertainty for now, preferring
to bank on Cuervo’s growth and strong branding.
“This deal is powerful,” a third banker said. “It has the
potential to lift Mexico’s market and politics aside, it is a household name in
the alcohol space.”
JPMorgan and Morgan
Stanley, GBM and Santander coordinated the IPO. The banks set a pricing range
between MXN30 and MXN34 per share.