Billionaire Carlos Slim is seeking to raise about $1 billion in a share offering of his retail and restaurant chain, two people with direct knowledge of the deal said, tapping into demand for Mexican consumer stocks.
Slim’s Grupo Carso SAB announced plans to sell shares in its Grupo Sanborns unit in a filing yesterday, without specifying how much it sought to raise. The people familiar with the matter asked not to be named because the details of the offering haven’t been made public.
Investors are paying a premium for Mexican retail stocks on bets that an expanding middle class will fuel more consumer purchases. Mexico’s economy, the second-largest in Latin America, is projected to expand 3.5 percent this year, similar to Brazil and faster than the U.S.
“You’ve got to take advantage of the boom times to sell at a good price,” Gerardo Copca, an analyst with Metanalisis SA, said in a telephone interview from Mexico City. “In this environment, I don’t see any reasons why they couldn’t do it. Sanborns has grown a lot, it has a presence in the main cities of the republic and it’s very well known by everybody.”
Carso slid 2.4 percent to 60.08 pesos at the close in Mexico City. The shares surged 85 percent last year. It has a market value of 138 billion pesos ($10.9 billion).
Grupo Sanborns scheduled a shareholder meeting for Jan. 29 to approve the share sale, a formality since Carso owns 99.98 percent of the company, according to its annual report.
In a preliminary filing to the National Banking and Securities Commission dated Nov. 16, Sanborns had sought to raise about $720 million through the sale of a 15.2 percent stake.
The nation’s biggest retailer, Wal-Mart de Mexico SAB, trades at a price-to-earnings ratio of 32, compared with a ratio of 19 for the benchmark IPC index, according to data compiled by Bloomberg. Department-store chain El Puerto de Liverpool SAB, grocer Grupo Comercial Chedraui SAB and convenience-store operator Fomento Economico Mexicano SAB also trade at premiums to the broader market.
Mexican consumer loans rose 16 percent in real terms in November from a year earlier, the central bank said last month.
The listing follows the 2011 spinoffs of Carso’s mining and real-estate units as Slim breaks the holding company into pieces to better reflect their value. Sanborns, which includes a retail chain of the same name and Mexican locations of Sears and Saks, is Carso’s largest division, making up about half of sales.
Slim’s Grupo Financiero Inbursa SAB is helping to manage the sale, along with Credit Suisse Group AG, Banco Santander SA and Citigroup Inc., according to the filing.
Jorge Serrano, Carso’s investor relations director, declined to comment on the amount the company seeks to raise.
With annualized sales of more than 80 billion pesos, Carso is the third-biggest holding in Slim’s $77.8 billion portfolio, according to data compiled by Bloomberg. It trails only wireless carrier America Movil SAB and financial-services firm Inbursa.
Sanborns was a publicly traded company until 2006, when Carso announced plans to buy the outstanding shares. Carso’s other holdings include a construction unit and a division that makes industrial materials such as pipes and ducts.
Slim acquired control of the Sanborns chain in 1985 and expanded it from 32 stores to 165 outlets across Mexico, with two in El Salvador and one in Panama as of the end of 2011, according to Carso’s annual report.
The retail company got its start as a soda fountain and pharmacy in 1903, when California immigrant Frank Sanborn opened the Sanborns American Pharmacy in downtown Mexico City, according to a history published on the website of Slim’s art museum. A nearby blue-tiled mansion, built in the 16th century, became the flagship Sanborns store in 1919, attracting revolutionary fighters, politicians and movie stars. The mansion still houses a Sanborns location.
Most Sanborns stores sport a restaurant and bar, along with electronics, gifts, magazines, books, video games and music. The company has considered as recently as 2010 opening a location in New York City.
Carso bought a majority stake in 1997 in Mexico’s Sears department stores. Sears is now the biggest part of Grupo Sanborns, making up more than half of its sales.
Through the end of 2011, Slim had opened two Saks Fifth Avenue stores in Mexico through an agreement with Saks Inc. Sanborns also includes Sanborns-branded cafes, Mix-Up music stores and I Shop computer outlets.
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