Largest IPO in Decades Pending In Argentina for Cement Giant

(Bloomberg) -- Argentina’s largest cement producer is heading for what might be the biggest initial public offering by an Argentine company in more than two decades.

Loma Negra Cia Industrial Argentina may raise as much as $954 million through share placements in New York and Buenos Aires; 6 million American depositary shares it’s offering, and 44.2 million via a secondary sale by its majority owner, Brazilian construction company Camargo Correa SA. That company has a 99.4 percent stake in Loma Negra, and is selling 49 percent of it. The indicative price range in the filing is between $3 and $3.8 per ADS. If priced at the top of the range, the sale may be the largest IPO by an Argentine company since YPF SA raised $2.7 billion in 1993, according to data compiled by Bloomberg.

The sale comes after Argentina’s economy expanded at the fastest pace in the second quarter since 2015, fueled in part by a construction boom that is propping up cement demand as President Mauricio Macri pushes a $26 billion infrastructure plan. Building activity has expanded by more than 10 percent each month since March.

"In our view, this deal is attractive to get exposure to Argentina’s ambitious infrastructure plan," Rodrigo Nistor, a corporate analyst at Buenos Aires-based brokerage TPCG, wrote in a note. "The cement market in Argentina is underdeveloped when compared to other countries in the region."

The region’s economic malaise has forced many companies to delay planned IPOs, including Votorantim, Brazil’s largest cement maker, in 2013. The most recent building-materials IPO in Latin America was Mexico’s Elementia in July 2015.

Loma Negra, which has a market share of 45 percent in Argentina, wants to use $350 million of the proceeds to more than double the capacity of its L’Amali cement plant in Buenos Aires province to 4.9 million tons by 2020 to meet the country’s rising demand and reduce operating costs.

Owner Camargo Correa, which bought Loma Negra in 2005 for about $1 billion from Amalia Lacroze de Fortabat, is looking to use $703 million of its proceeds to repay a portion of its outstanding debt, according to the filing. The company has been selling assets as it pays fines related to the country’s largest-ever corruption investigation that has engulfed state-run oil company Petroleo Brasileiro SA. The company also has high amounts of dollar-denominated debt it used to purchase Portugal’s Cimpor at 5.5 euros per share, which it later de-listed at 36 euro cents.

"The initial plan had been to list the Brazilian subsidiary, but the market did not allow them to do that," said London-based Bloomberg Intelligence analyst Sonia Baldeira. "Now the Argentine market is very promising and the solution to IPO this unit seems quite interesting."

Market Momentum

Argentina’s equity markets are gaining momentum, with $3.5 billion ready to go public as some of the country’s largest companies look to raise capital for the first time. The equity pipeline solidified after Macri’s pro-market party made a strong showing in August’s mid-term primaries. Investors are looking for him to now push through needed labor and tax changes after his ruling coalition did better than expected in the final vote in October.

Loma Negra hired Bank of America Corp., Bradesco BBI SA, Citigroup Inc., HSBC Holdings Plc and Itau BBA for the sale, according to a filing with the Securities Exchange Commission.

--With assistance from Eugenio Lobo

To contact the reporter on this story: Carolina Millan in Buenos Aires at cmillanronch@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Christiana Sciaudone, Scott Schnipper

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