Billionaire Slim Parlaying IPad Demand Into IPO of Sanborns

Billionaire Carlos Slim is taking Mexican retailer Grupo Sanborns SAB public as revenue surges from sales to consumers looking to shop at its Saks Fifth Avenue stores and buy Apple Inc. iPads.

Slim’s Grupo Carso SAB is selling an 18 percent stake in Sanborns after the Mexico City-based retailer’s sales rose 8.2 percent in 2012 to 39.4 billion pesos ($3.1 billion). The initial public offering, scheduled to price today, aims to raise about 12.5 billion pesos including an overallotment option for underwriters, according to a filing.

The IPO will test investor willingness to pay a premium over the benchmark for a company with 414 stores across Latin America’s second-biggest economy, including Sanborns and Sears department stores and iShops that sell Apple computers, phones and tablets. The midpoint of the offering price range represents 24 times Sanborns’s trailing 12 months of earnings, compared with 27 times for competitor El Puerto de Liverpool SAB and 19 times for Mexico’s IPC index.

“We’re going to see stronger participation because of Slim’s reputation,” Jorge Lagunas, who oversees $200 million in stocks at Grupo Financiero Interacciones SA, said in a telephone interview today from Mexico City. “I like the story, and I’d like to participate, above all because of the long-term outlook.”

Sanborns said it will offer the shares at a projected price of between 27 pesos to 32 pesos each in a deal led by Credit Suisse Group AG and Slim’s Grupo Financiero Inbursa SAB. Trading is scheduled to start tomorrow.

Immigrant’s Son

The IPO is Mexico’s first this year and the first new equity listing for the world’s richest man since January 2011, when Grupo Carso spun off silver and gold miner Minera Frisco SAB and real-estate company Inmuebles Carso SAB.

The 73-year-old Lebanese immigrant’s son has an estimated fortune of $78 billion, based on the Bloomberg Billionaires Index.

Grupo Carso is his third-biggest company, with a market value of 141.4 billion pesos, according to data compiled by Bloomberg. Grupo Carso fell 0.1 percent today to 61.67 pesos and has dropped 1.4 percent this year.

Sanborns holds licenses to operate stores under the brand names Sears, Pier 1 and Saks Fifth Avenue, according to the filing. It operates the iShops under a non-exclusive license with Apple and has stores under the name Mixup that sell music, movies and concert tickets. The iShop-Mixup group of businesses is the country’s top distributor of Apple products and accessories, according to an investor presentation.

Growth Potential

Sanborns, while already in 65 cities, says it has growth potential because Mexico has 250 cities with populations of more than 50,000, according to the investor presentation, which was filed with the Mexican exchange. The company plans to use some of the IPO proceeds to open and remodel stores, according to the filing.

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.

Profit last year rose 12 percent last year to 3.3 billion pesos, according to the company.

Investing behind Slim has its risks, Ed Kuczma, an emerging-markets analyst at Van Eck Associates Corp., said in a phone interview from New York.

Dutch Losses

Shares in his America Movil SAB, Latin America’s biggest mobile-phone company, fell 2 percent on Feb. 5, the most in two months, amid concern it faces growing losses on an investment in Dutch phone company Royal KPN NV.

“Recent history suggests Slim may not exactly be a person you want to be co-investing with,” Kuczma said. “America Movil’s been very good operationally, but some of the extracurricular activities in terms of investing in Europe are not the best use of proceeds.”

Slim’s group bought a majority stake in Sears Mexico in 1997 and has expanded it to 78 stores from the 40 in operation at the time. Sears Mexico, which “constantly” generated losses before Slim took over, is profitable now, according to the filing.

Before it's here, it's on the Bloomberg Terminal.