Yahoo Finance Six-Way Bidding War Will Decide Mexico’s Nearshoring King
(Bloomberg) -- An unprecedented contest is underway in Mexico over the future of one of the top beneficiaries of the factory boom south of the US border.
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TF Administradora Industrial, or Terrafina, is waiting for final bids from at least six different suitors to launch as public tenders. Three of the initial offers would use share exchanges or a merger to create Mexico’s biggest industrial property company. Two offers may be in cash, giving investors a chance to sell their stock around record highs.
A meeting on April 30 to detail the bids, as well as the trust’s own proposal to take over its property management and issue more stock, failed to reach quorum, according to a company representative who declined further comment.
Industrial real estate has been on a tear in Mexico as more companies seek space to export to the US. Hype around the “nearshoring” trend has sparked an equity issuance revival in the country’s stock market. In the coming weeks, Terrafina investors will receive a parade of tender offers to acquire their shares in the open market. If a majority accept a share-based offer, the resulting company will be one of the most liquid ways for investors to play the nearshoring theme in Mexico.
Terrafina’s stock is up 17% this year after bids started emerging in February, taking its market value to $1.9 billion. Mexico has never seen so many competing public bids for a company at the same time, said Chief Executive Officer Alberto Chretin.
“We are in uncharted waters,” Chretin said in a video interview. He said the bidders are likely to improve their initial nonbinding offers, and he expects the first tenders to be launched in the market during the first two weeks of May, pending regulator approval.
The value of the publicly disclosed offers is difficult to calculate and compare because they involve different assumptions about capitalization rates and the way the companies measure their own assets.
Mexican pension funds are poised to decide which offer wins, since they hold around 50% of Terrafina stock, Chretin said. He declined to provide more specific information since pension fund holdings are not publicly available. Offers need 51% approval to win. If the pension funds don’t agree on an offer, things could get more complicated, and minority shareholders will enter the fray, he said. There could end up being multiple rounds if tenders fail to reach 51%.
The stock offers from the country’s other real estate investment trusts, or Fibras in Spanish — Prologis Property Mexico, Fibra Uno Administracion, Fibra Macquarie Mexico and Fibra MTY — offer different advantages.
Prologis is backed by the world’s largest industrial REIT, Prologis Inc. On top of its 47 million square feet (4.4 million square meters) in warehouses and industrial parks, it offers some 10 million more of inventory in the pipeline. The scale of that deal is dwarfed by a more complicated merger offer from Fibra Uno, or Funo. Latin America’s biggest REIT wants to transfer all its industrial properties into Terrafina.
Funo, which also has vast office and commercial holdings, had been seeking to launch Mexico’s biggest initial public offering in six years with a carve-out of more than 81 million square feet of industrial properties. The new stock was dubbed Nearshoring Experts & Technology SC, or Fibra Next, but the plan to sell shares was derailed by Mexico’s tax authorities, who have refused to give the company the go-ahead for the listing.
Its founders, the El-Mann family, now want to revamp the Fibra Next plan by transferring the assets to an already listed vehicle instead. They also have some 65 million more square feet in their land bank that they want to eventually transfer to the new company. Unlike the other bids, the Funo merger proposal would require a shareholder vote instead of a tender offer, Chretin said. Investors will probably wait to see the other tenders before deciding whether to vote on the Funo offer, Chretin said.
The offers from Fibra Macquarie Mexico and Fibra MTY seem less attractive, according to Itau BBA’s Alejandro Fuchs, who predicts either Prologis or a cash offer will win. “We believe that the upper hand on this race continues to be on Prologis side,” the analyst wrote in a note last week.
Billionaire German Larrea’s conglomerate Grupo Mexico SAB has been reported by Mexican newspaper columnists to be in the bidding. On a call with analysts last week, Grupo Mexico executives declined to comment on whether the company had made a bid, but said they were interested in acquiring industrial properties.
Pension funds may not want the reinvestment risk of having to redeploy so much cash, said Bradesco BBI strategist Rodolfo Ramos. Prologis or Funo will probably prevail since they have the biggest pipelines to fuel growth, he said, though his view could change once the bids are revealed.
“This has very important implications for whoever ends up with it, and whoever doesn’t end up with it,” Ramos said.
--With assistance from Ezra Fieser.
(Updates with detail from company representative in third paragraph)
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