Mexico’s equity issuers are set to keep up with a record pace, reloading the pipeline for what should be an active June-July issuance window.
Issuers have sold $4.52 billion so far this year from six transactions, according to Dealogic data, all in the first three months, a pace that is Mexico’s fastest ever. It sets the country up to pass last year’s total of $9.09 billion from 10 deals, which bankers fully expect to happen.
Carlos Slim’s Grupo Inbursa is readying an all-secondary share follow-on sale, which will provide an exit platform for Spain’s CaixaBank to sell as much as half of its 20% position in Inbursa and bring much needed capital back to Europe. The sale should raise at least $1 billion.
Hotels continue to offer investors a means to play the Mexican economic growth story. Concentradora Fibra Hotelera Mexicana (Fibra Hotel) will look to top up on growth funds through an equity follow-on. The business hotel-focused member of Mexico’s small but growing Fibra real estate fund investment class raised $324 million in an IPO last year, and is expecting to raise more than that in the upcoming deal, to be held as soon as at the end of the month. The shares have gained more than 30% since the IPO.
Hoteles City, Mexico’s third-largest hotel chain, is preparing to become the latest Mexican to IPO. The transaction is expected to raise less than $500 million.
Industrial real estate specialist Vesta also intends to hold a follow-on, according to regulatory documents. Property-related issuers have accounted for the bulk of sales this year, boosted by the IPO of Fibra Inn ($350 million) and Prudential’s Terrafina Fibra ($340 million), and the $1.73 billion follow-on from Fibra Uno.
Though it has become fashionable to call Mexico’s equities expensive compared to, say, Brazil, if the growth numbers remain reasonable and the new government’s reform agenda stays on track, investors – particularly the flush domestic pension funds – should support the new issuers this year.
Nomura remains optimistic about the reform agenda, it says in a recent report, though less certain about the timing.
“We remain positive about the reform outlook, but expect the most of them during the ordinary session of congress that starts in September as opposed to in the summer (at least for the energy reform),” the bank says, noting an expectation for minimal progress before local-level elections in early July.