* Share offering is largest ever by Mexican company
* Offering values Santander Mexico at $16.54 billion
* Proceeds to boost parent company’s capital
* Mexican unit seen tapping fast-growing credit market
(Adds chairman comments, details, share price)
By Lizbeth Salazar and Jesús Aguado
MEXICO CITY/MADRID, Sept 26 (Reuters) – Banco Santander
, seeking extra cash buffers against potential losses
from Spain’s property crash, raised more than $4 billion from
listing its Mexico operation in the latest in a
series of national unit disposals.
Spain’s biggest bank priced the dual share offering at 31.25
pesos per share, valuing Santander Mexico at $16.538 billion
(12.78 billion euros).
The initial public offering of 25 percent of the unit’s
shares was set to be the second largest in the United States
this year behind Facebook and the largest ever of a
Mexican company.
Analysts said the flotation could also persuade other banks
to launch their own IPOs and pointed to Spanish bank BBVA’s
Mexican arm Bancomer as a likely candidate for a dual
listing.
Santander embarked years ago on a strategy of splitting off
national units and has already listed its Brazilian and Chilean
arms. Argentine and UK businesses are soon to follow.
The proceeds from the Mexican unit’s listing, estimated at
2.8 billion euros, will be used to boost the capital levels of
Santander in Spain, where it is relatively healthy but has taken
hits from writedowns from Spain’s deep economic recession.
Assuming the green shoe is exercised in full, the issue
would push the bank’s core tier one ratio – a key measure of its
strength – to 10.6 percent.
MIDDLE RANGE
The sale price was in the middle of the range of 29 to 33.5
pesos set by the bank earlier this month, beating the
predictions of wary investors and cementing Mexico’s emergence
as Latin America’s investment hot spot..
The transaction was split in two tranches: one in Mexico,
for 19 percent of the shares in the global offering, and one in
the United States representing 81 percent.
The U.S.-listed shares, each the equivalent of five local
ones, were priced at $12.185, Santander said in a statement.
That would bring the total amount raised to some $4.126
billion, a 65 percent premium to the $2.5 billion Santander paid
in June 2010 for the same-sized stake from Bank of America.
The bank said in a filing with the Mexican exchange that it
sold nearly 1.7 billion shares, including the greenshoe
overallotment, in a Mexican and international offering worth
52.8 billion Mexican pesos ($4.12 billion).
Santander’s Mexico unit said that it sold 319,977,408 shares
in its Mexico offering, including the greenshoe, and
1,369,834,925 shares in its international offering, including
overallotment.
BOOSTING RESERVES
The share price should rise in initial trading on Wednesday,
according to Carlos Alonso, a trader at brokerage Interacciones
in Mexico City.
Some fund managers however had reservations about the
offering, betting it would price at a discount because of the
parent company’s exposure to the European debt crisis and
because the Mexican bourse is already trading at a high
price-to-earnings ratio.
Since Santander needs to set aside around 2 billion euros to
cover potential losses on its real estate assets, investors are
worried it could sell more shares in the Mexican unit if it
needs more capital, devaluing early investors’ holdings.
Santander fell 3.29 percent to 6.000 euros, while Spain’s
blue chip index Ibex-35 was down 3.35 percent at 12.15
GMT. Traders said shares were falling because of the myriad
uncertainties surrounding the Spanish economy.
Spain became the focal point of the euro zone debt crisis
earlier this year as it became clear its banks would need
financial support to rid their balance sheets of around 185
billion euros of toxic real estate assets.
An independent stress test of the country’s banking sector
revealed capital needs of 50 billion to 60 billion euros ($77.7
billion) although Santander is widely expected to present a
clean sheet.
MORE LISTINGS
If the listing was seen as a test of investor interest in
Mexico, the country scored high, analysts said.
Brazil has long been the regional darling of investors, but
a recent soft patch there and a slowdown in China’s breakneck
growth has now swung the pendulum in favor of Mexico.
In the seven months through July, foreign investors pumped
$3.4 billion into Mexico’s stock market compared with $2.9
billion in Brazil.
Santander Mexico, which accounts for about 12 percent of the
group’s profits, is forecast to grow on the back of economic
expansion projected at 4 percent this year and 2013.
It stands to benefit from a growing middle class that is
just starting to open bank accounts and take out loans for the
first time.
The listing “opens the door for perhaps medium sized or
smaller banks to pursue some IPOs,” said Alejandro Garcia,
senior banking analyst with Fitch Ratings in Monterrey, Mexico.
Bank of Nova Scotia said earlier this month it may
sell minority stakes in some Latin American operations, although
officials stressed there were no immediate plans. [ID:
nL1E8KBNIV].
The Mexican unit will begin trading on the New York Stock
Exchange on Wednesday under the ticker “BSMX”
The IPO underwriters include UBS, Santander, Deutsche Bank
and Bank of America Merrill Lynch.
($1 = 12.8005 Mexican pesos)
($1 = 1.0000 US dollars)
($1 = 0.7715 euros)
(Additional reporting by Louise Egan, Michael O’Boyle, Olivia
Oran and Herb Lash; Editing by Julien Toyer and David Cowell)