Cheap Chile Valuations Kill IPO Goal for Gas Distributor Lipigas

  • Cancels what would have been first IPO in more than two years
  • Stock-market slump in November curtailed investor appetite

Empresas Lipigas SA called off plans to list shares in what would have been Chile’s first initial public offering in more than two years as a slump in the local stock market stifled appetite from investors.

Lipigas, which distributes canisters of heating and cooking gas in Chile, Peru and Colombia, canceled the sale after bidders failed to meet an undisclosed minimum price, Chief Executive Officer Angel Mafucci said Thursday in a filing to regulators. Offers totaled 176 billion pesos ($251 million). Lipigas planned to sell 12.6 million new shares for as much as 63 billion pesos and an additional 21.5 million shares that are in hands of investment fund LV Expansion.

The market for IPOs in Chile has dried up as trading volumes dwindled and markets retreated amid an economic slowdown and falling commodity prices, sending average valuations to near the lowest since September 2011. Chile’s benchmark IPSA stock gauge fell 4.5 percent in November, its worst monthly performance in almost two years, and 20 percent of its members traded at 52-week lows Friday, the highest ratio since August.

"Lipigas is a great company, but in this negative scenario lots of shares are trading at discount prices and you have to compete against that," German Guerrero, a partner at Santiago-based brokerage MBI Inversiones, said in an interview.

Chile’s last IPO was in March 2013, when builder Empresa Constructora Moller & Perez-Cotapos SA raised $89 million. Since then, the IPSA has retreated 12 percent and average trading volumes have fallen to $88 million per day from $191 million. In that time span, Mexico has had 17 IPOs and Brazil has had 10.

The IPSA is trading at a price-to-earnings ratio of 15.7, compared with an average of about 20 over the past five years.

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