IPO Drought in Chile May End in 2011 Aided by Economy, Merger of Exchanges

Chile is set for its busiest year of initial public offerings since 2005 as a rebounding economy and surging equity prices lure investors, according to the Santiago securities exchange.

Seafood producer Cia. Pesquera Camanchaca SA is poised to end Chile’s one-year IPO drought in a sale planned for next month while five other companies may go public next year, Jose Antonio Martinez, chief executive officer of the Bolsa de Comercio de Santiago, Chile’s biggest exchange by trading volume, said in an interview yesterday.

Chilean companies are returning to the equity market as the economy expands at the fastest pace in five years, recovering from last year’s recession and February’s earthquake. Chile’s Ipsa index has surged 39 percent this year to record levels, beating the MSCI EM Latin America Index’s 9.1 percent gain. The planned integration of securities trading in Chile, Colombia and Peru will increase volumes and give a further boost to IPO activity, Martinez said.

“I’ve heard that there will be five companies looking to do IPOs next year,” Martinez, 52, said from the exchange’s downtown Santiago offices. “It’s a consequence of the recovery of the two last years and the recuperation of the economy. That means new projects, new developments, new investment and companies consider this option.”

He declined to name companies that may sell shares next year, saying their plans aren’t set. Chile’s economy will expand 5 percent to 5.5 percent this year, the central bank forecast in its quarterly monetary policy report published Sept. 8.

Cross Trading

The exchanges in Chile, Peru and Colombia plan to begin a trial of cross-border trading in stocks such as Cencosud SA, Southern Copper Corp. and Ecopetrol SA this month and offer access to clients in January. In a second phase they may establish a common exchange which at current prices would have a combined value of $647 billion compared with Mexico’s $462 billion and Brazil’s $1.7 trillion, according to Bloomberg data.

Banco Davivienda SA was the only company to hold an IPO in Colombia this year, raising $233 million, while Pesquera Exalmar SA was Peru’s sole IPO in the last three years, according to data compiled by Bloomberg.

Colombian mining and oil companies may sell shares for the first time next year, Juan Pablo Cordoba, president of the nation’s stock exchange, said in a Nov. 10 interview. Investors in Peru and Chile have also expressed interest in Colombian banking stocks, Cordoba.

Mining Stocks

Integration may also entice Colombian and Peruvian companies to list shares in Chile, Guillermo Tagle, who oversees about $1 billion as chief executive officer of IM Trust Corredores de Bolsa SA, said in an interview from Santiago.

“We are sure that the integration of the three markets will be attractive for the issuers,” Martinez said. “Once the integration starts, investors in all three markets will be immediately available to participate in the IPOs.”

The integrated bourses, to be called MILA, or Mercado Integrado Latinoamericano, aim to begin a series of common indexes in the first half of next year before including fixed- income securities, Martinez said.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net.

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net.

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