Controladora Comercial Mexicana SAB, the Mexican supermarket chain that defaulted on debt in 2008, said it has held discussions on a sale of its operations, triggering the stock’s biggest gain in four months.
Comerci, as the company is known, said in a statement to the Mexican stock exchange that the non-binding talks have involved foreign and domestic companies. The shares rallied 4.2 percent to 52.19 pesos in Mexico City trading today in the biggest advance since September 2013. At current levels, the company has a market capitalization of 62.1 billion pesos ($4.7 billion).
Comerci’s shares have surged 24-fold from their October 2008 low, when the company filed for bankruptcy protection. Buyers would benefit from the Mexico City-based retailer’s growing foothold in the gourmet supermarket segment through City Market brand, which has proven less vulnerable in an economic slowdown, according to Juan Elizalde, an analyst with Banco Ve Por Mas SA.
“They’ve been focusing more on the middle and upper-class segment, and it’s been working well for them,” Elizalde said in a telephone interview from Mexico City.
Sales at Comerci stores open at least 12 months expanded 2.3 percent in the third quarter of 2013, compared with a 2.5 percent drop for companies tracked by the nation’s retail association, according to the company’s website.
Organizacion Soriana SAB (SORIANAB), Mexico’s second-biggest supermarket operator, and Grupo Comercial Chedraui SAB, a Xalapa, Mexico-based competitor, said the rally in Comerci shares has already made the company prohibitively expensive.
“There’s a big element of speculation in the value of the shares, and that makes it unviable,” Soriana Chief Financial Officer Aurelio Adan said in a telephone interview from Monterrey today. While he said he hasn’t yet been contacted by Comerci about a sale, he is not interested in participating.
Jesus Arturo Velazquez, an investor relations official for Chedraui, declined to comment on whether Chedraui had held talks, although he said Comerci’s share multiples “don’t seem justified.” They would prove “quite high” for any potential acquirer.
After today’s advance, Comerci’s enterprise value -- or the price a buyer would pay for all shares and debt -- was 15.9 times trailing earnings before interest, taxes, depreciation and amortization. That compares with 10.6 times for Soriana, 10.7 times for Chedraui and 13.9 times for Wal-Mart de Mexico SAB, Latin America’s biggest retailer.
Comerci filed for bankruptcy protection in October 2008 after bets the Mexican peso would strengthen in the derivatives market backfired when the global financial crisis sparked a 20 percent plunge in the currency that year. It subsequently restructured about $1.5 billion in debt.
Mexico City-based newspaper El Financiero reported on Comerci’s talks earlier today.
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