What Two Mexican Billionaires, Working Together, Can Do for YouAndrea Navarro
One man is the richest in Mexico. His partner, another billionaire, delivered the country’s best stock returns during his nine years as chairman of a chemical company. Together, they make even a cement company seem glamorous.
Elementia SAB, jointly owned by Carlos Slim and Antonio del Valle Ruiz, plans to raise about 4.5 billion pesos ($290 million) in an initial public offering on July 9. The two men aim to use the proceeds from the share sale to acquire smaller rivals and build up a competitor to Cemex SAB, the biggest cement maker in the Western Hemisphere.
It will be the first cement IPO in Mexico in at least 15 years, and also the first time traders can invest alongside the two billionaires in a single stock. Slim, who built a $68 billion fortune in telecommunications, hasn’t taken one of his companies public since restaurant chain Grupo Sanborns SAB’s IPO in 2013. Del Valle led Mexichem SAB to a 76-fold stock return from 2002 through 2011.
“Individually, the two of them are well-recognized in the market,” said Monex analyst Fernando Bolanos in a phone interview. “They’re no amateurs.”
Elementia, which also produces metals, plastics and construction materials, traces its roots to 1932 and a company called Eureka Mexico. It’s Mexico’s fifth-biggest cement maker.
Del Valle controls 51 percent, while Slim owns 49 percent.
“We benefit from the support of our main shareholders,” Elementia’s latest filing on June 25 says. “They have a long history of creating value in diverse geographical areas and industries.” Representatives of del Valle’s holding company, Grupo Kaluz, which oversees Elementia, and Grupo Carso did not immediately respond to requests for comment.
Mexico City-based Elementia said in a company filing it will invest about $250 million of the IPO proceeds over the next three years, principally to increase cement production; project plans include an overhaul of the Tula plant north of Mexico City. The expansion “will increase our total production capacity to 3.5 million annual tons” by 2017, the June 25 filing says.
The company plans to use about $45 million to make the final payment on its purchase of the 47 percent of Cementos Fortaleza it didn’t already own from Paris-based Lafarge SA. The $225 million purchase was announced last year. Fortaleza, known for its sponsorship of Mexican professional wrestling, is now Elementia’s main cement division.
One question is whether the market conditions are ripe for the IPO, with international markets rattled by the Greek debt crisis. Autoparts company Nemak SAB went public this week, and its shares priced at the lowest end of its targeted range. Ramon Leal, chief financial officer for Nemak’s parent company, Alfa SAB, said in an interview Wednesday that investor concern over Greece affected demand for the shares.
“Greece is making people nervous,” said Jorge Lagunas, who manages about $200 million in investments at Interacciones Casa de Bolsa SA.
Fortaleza would consider acquisitions of small- to mid-size cement companies, based on a May interview with Juan Francisco Sanchez Kramer, head of mergers and acquisitions and investor relations for Grupo Kaluz, on behalf of the unit. The company also might try to build some new plants, Kramer said.
Bolanos, of Monex, said Mexico’s cement market offers attractive profit margins on sales to do-it-yourself consumers; larger projects are less profitable.
“There are larger margins when a company does retail sales,” he said. “The product has to be packaged, and those costs are transferred to the consumer.”
When del Valle, 77, ran Mexichem, a petrochemicals company that’s Latin America’s largest maker of plastic pipes, he used acquisitions to increase revenue, including five in 2010 alone.
“It makes sense that Elementia would want to expand,” Sonia Baldeira, an analyst for Bloomberg Intelligence, said in a phone interview from London. “The game is really about accumulating more portfolio and capacity. There is space in the market to succeed even though the competition is fierce.”
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