Cemex’s share sale may need 10% discount

Cemex’s share sale may need 10% discount
Published: 22 September 2009

Cemex, the largest cement maker in the Americas, may have to sell shares at a discount of as much as 10 per cent to market price as it competes for investor funds, according to Actinver SA.

Cemex, which is seeking to raise at least US$1bn to pay down debt, plans to sell stock September 22.

“There’s a lot of paper trying to come through,” said William Landers, who oversees about $6 billion in Latin American stocks at BlackRock Inc. in Plainsboro, New Jersey. “They are definitely going to have to compete for investors’ attention and capital.” Landers declined to say if he would buy the shares.

Cemex’s planned 1.2 billion-share offering, its largest ever, will require a discount as “candy” to lure investors, said Rogelio Gallegos, who oversees $255 million in Mexico City at Actinver, Mexico’s largest independent money manager, and plans to buy the shares. David Riedel, the president of Riedel Research Group Inc. in New York, predicts Cemex will offer 5 percent less than current prices.

Cemex would raise 20.2 billion pesos (US$1.5bn) by pricing shares at 16.83 pesos, a 10 percent discount to the Sept. 18 close. The company would raise 21.3 billion pesos if the discount were 5 percent.

The shares slumped 7 percent to 17.39 pesos today in Mexico City trading, the sharpest decline since July 29.

Brokerages led by JPMorgan Chase & Co. and Banco Santander SA will handle the sale, according to the prospectus. Gerardo Ancira, a spokesman for Banco Santander Mexico, declined to comment. The press office of JPMorgan in New York didn’t return a call seeking comment.

Chief Executive Officer Lorenzo Zambrano is tapping the equity market for the first time since 2003 as part of an August agreement with banks to refinance US$15bn of debt and avert a default. Cemex’s debt tripled after the company bought Rinker Group Ltd. in July 2007 for US$14.2bn, just as a housing slump hit the US and spread to the company’s other markets.

“The deal will get done, but will have to be at a discount because of the issues with debt,” Riedel said in an e-mail response to questions.