Servicios Corporativos Javer SAPI’s deal to buy most of Empresas ICA SAB’s homebuilding unit has been canceled. ICA shares tumbled.
ICA, Mexico’s biggest construction company, agreed on Dec. 3 to exchange 20 housing developments in five states for a 23 percent stake in Javer. The companies decided to cancel the deal after failing to reach a final agreement 180 days after the announcement, ICA said in a statement sent today to the nation’s stock exchange.
“This is bad news” for ICA, said Javier Gayol, a Latin America housing equity analyst at Corporativo GBM SAB, a Mexico City-based brokerage firm. “ICA was losing money in this business.”
Homebuilders Urbi Desarrollos Urbanos SAB and Corp. Geo SAB defaulted last month after a shift in government policy to promote more capital-intensive apartments in urban areas over homes in commuter towns depleted their cash.
ICA fell 7.8 percent to 23.15 pesos at the close of trading in Mexico City trading. The yield on Javer’s $320 million of bonds due in 2021 declined 10 basis points, or 0.1 percentage point, to 11.81 percent today, compared with 9.13 percent when the company on Dec. 3 agreed to an all-stock deal for assets of ViveICA, as ICA’s subsidiary is known.
Javer, which reported a one-time expense of 193 million pesos ($15.1 million) related to the ViveICA transaction on April 22, is the only Mexican homebuilder that hasn’t had its credit rating cut this year. The company’s B1 rating from Moody’s Investors Service, four levels below investment grade, is still on negative outlook.