LatinFinance - Special Edition - August 2013 - 17

done, with 50% to 70% of the
buying coming from Brazil. the
situation is similar in mexico,
with a 50% international-50%
local split normal in most times
but locals taking 60% to 70%
when things get leaner.
“Right now local investors
are critical to most latam ecm
transactions,” says lisandro
miguens, co-head of investment banking for latin america at JPmorgan. “We need to
bear in mind that pension fund
systems are developed and sophisticated in chile, colombia,
Peru and mexico. additionally,
in Brazil the local asset management community is not only
large and liquid, but it also acts
as a thought leader.”
By 2005, 144a deals were
well accepted from mexican
issuers. the pace picked up in
2006-2007 though only in 2013
is the market truly flourishing.
favorable macroeconomic
conditions and prospects for
reforms have meant fresh international attention, and finally a
consistent pipeline. mexicans
had raised more than $9 billion
in 2013 through to July, already
setting a new record, and have
opened new sectors.
a big lift came from changes
to pension fund regulations,
allowing the afores, as they are
known, to pick stocks. Supermarket operator Grupo comercial chedraui was the first to
take advantage of support from
the afores, in 2010, raising $423
million in the first mexican iPo
in about two years.
Santander mexico’s $4.1
billion 2012 iPo is the country’s
largest yet. at the same time,
the breadth has greatly improved in recent years, with fibra Uno leading six fibras – real
estate trusts – to market and
ienova offering long-desired
energy sector exposure.
Changing market
colombia’s market has
emerged as the country has
put difficult years behind it,
although investors would still

like to see more opportunities.
the country must make more
progress on regulations that
make it complicated for international investors to buy.
last year’s $1.15 billion iPo of
cemex latam marked a turning point for colombia. the
issuer set a price range before
the sale and waited until pricing to divide shares into local
and 144a tranches. this is taken
for granted in other countries,
but is a novelty in colombia,
where deals previously needed
to set a price before taking orders for two weeks, remaining
open to market volatility. the
use of greenshoe options could
come next.
“colombia has been moving in the right direction,” says
Juan carlos George, head of
latam capital markets at citi.
“now you have a bookbuilding
process that has been used in
different transactions.”
the convergence of stock
markets across the andean
region through mila, the proposed integrated latin american market, as well as looser

restrictions for pension funds’
investments should mean more
deals from chile, colombia,
and Peru. investors want access to Peru, but it still remains
behind other countries in
terms of new issuance. However, its rules are more in line
with international standards
than colombia or chile, which
lacks a bookbuilding process to
match the US, mexico or Brazil.
“Regulations are going to
evolve, mainly as a result of the
growth in the size of the funds
that institutional investors
have to invest,” Vargas says. “as
those pools grow they will need
more diverse forms of investment.”
Still, in recent years, latam
issuers have proved they can
deliver transactions as big as
those anywhere in the world,
even if investors’ reactions
aren’t always positive. Petrobras’ $70 billion 2010 follow-on
– or $20 billion if you prefer to
count the market-oriented portion – upset minority holders.
Santander Brasil’s $7.5 billion
iPo set a benchmark in 2009,

but traded poorly. Buyers of
oGX’s $4 billion 2008 iPo likely
were regretting it in 2013.
Santander mexico has so far
fared better than its Brazilian
counterpart. this year, Banco
do Brasil’s $5.7 billion carve-out
of its BB Seguridade insurance
business was well received.
Left out
one of the main difficulties
ahead may be for smaller issuers. they still lack the access to
the equity market that their US
counterparts have, although
there are exceptions including
several chileans and Brazilian
linx, which raised $265 million
this year. Brazil’s Bovespa mais
platform for smaller companies
was a start, but only counted
three stocks as of July.
“We still haven’t developed
a market for smaller companies to list,” says José olympio
Pereira, ceo of credit Suisse
in Brazil. “We’re seeing many
relatively smaller companies
go public in china and india.
there is still a lot of potential.
We’ll eventually get there.” LF

Equity dEal of thE quartEr cEntury

Bovespa Holding
BrL6.63bn IPO, 2007
the possibilities for equity issuance by latin american companies have expanded since Bovespa Holding’s 2007 iPo. But the deal’s intricate structuring
and its standing as one of the most substantial iPos to date from any exchange,
put it top of its class in latin america. it required particular skill from the stock
exchange’s top executives and bankers hired to transform a complex partnership of dozens of broker-dealers into a publicly traded entity with a single share
class.
the 6.63 billion real ($3.68 billion) transaction was multiple times oversubscribed and shot through a 15.50-18.50 real per share indications to price at the
top of a revised 20.00-23.00 real range. Still, shares leapt more than 50% the
following day. foreigners bought nearly 80% of the sale which was managed by
credit Suisse and Goldman Sachs.
the deal was followed a month later by the 5.98 billion real Bm&f listing, and
the two would agree to merge the following may.
the Bovespa iPo was the brightest from a slew of such deals in 2006 and
2007. there have been several standout deals since, some considerably larger.
these include a Petrobras follow-on of which around $20 billion was sold publically, and BtG Pactual, BB Seguridade and Santander Brazil and mexico iPos.
But none have matched the smooth execution of Bovespa’s, nor the complexity needed to list the Brazilian exchange that would soon merge with another
newly public company, Bm&f. LF
August 2013 - 25 Years - l atinfina nce.com 17

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