Banorte Drops Before $2.3 Billion Stock Sale: Mexico City Mover

Grupo Financiero Banorte SAB, Mexico’s third-largest bank, fell for a third straight day as it prepares to sell as much as $2.3 billion of stock, the country’s biggest equity offering of the year, amid a market rout.

The shares fell 0.2 percent to 72.21 pesos at the close in Mexico City, after dropping 1.2 percent in the two previous sessions. The country’s benchmark IPC index fell 1.6 percent, the worst performance among 18 major world equity indexes tracked by Bloomberg.

Banorte is raising money to finance acquisitions at a time when Mexican companies have delayed or scaled back equity offerings. The benchmark IPC index of 35 stocks plunged last month to the lowest level since September 2011, and is down 9.8 percent this year. Banorte pared its planned offering earlier this month from a previously targeted $3 billion.

“It’s not the ideal day,” Gerardo Copca, an analyst at Metanalisis SA, said by phone from Mexico City. “Banorte has to overcome a bigger supply of shares than are already out there and a lack of demand.”

Mexico City-based Banorte, the country’s biggest bank by outstanding loans, said in a July 3 filing that it will sell $2 billion of stock today in a follow-on offering, with a 15 percent overallotment option for underwriters.

The bank will use the money to pay back $800 million borrowed this year to buy a stake in Banco Bilbao Vizcaya Argentaria SA’s pension fund unit, as well as to finance the planned acquisition of a stake in Seguros Banorte Generali and Pensiones Banorte Generali, according to regulatory filings. An additional $325 million will help pay for the repurchase of a stake in the lender from the International Finance Corp.

IPC Plunge

Today’s plunge in the IPC index was the biggest since June 20, led by a decline in America Movil SAB, billionaire Carlos Slim’s cellphone company.

Twenty-five of 35 stocks on the country’s benchmark index fell as concern mounted that second-quarter results for Mexican companies will fall short of expectations. Alpek SAB, the country’s largest petrochemicals maker, yesterday posted a surprise loss of $71 million for the second quarter because of costs linked to the accelerated closing of a plant in North Carolina.

“It left a bad feeling in the market,” Copca said.

Issuance Slows

A rally in Mexican stocks early in the year helped spur at least $5.5 billion of equity offerings through June, a record start.

The pace slowed as a selloff of emerging-market assets saddled the IPC in June with its fifth straight monthly decline. The Mexican peso fell 4.6 percent versus the dollar in the second quarter.

Controladora Vuela Cia. de Aviacion SAB, the country’s third-biggest airline, delayed an initial public offering until at least September, two people with direct knowledge of that transaction said July 2.

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