Santander to float Mexican unit in IPO

Spanish banking group Banco Santander SA continued its campaign of conquest on the Latin American stock exchanges Tuesday, Sept. 4, with the announcement of a float of its Mexican subsidiary with a valuation of up to $17.23 billion.

"This transaction is another step in our strategy of having quoting subsidiaries," said Santander chairman Emilio Botín in a statement, announcing an initial public offering of 24.9% of Grupo Financiero Santander México SAB de CV. "Our three largest subsidiaries in Latin America will be among the top 100 banks in the world by stock market value."

The Madrid bank said it plans to offer up to almost 1.7 billion shares of Santander México -- including an overallotment option for the underwriters -- within a pricing range of 29 to 33.50 pesos per share. Those prices imply an offering of 49 billion to 56.61 billion pesos ($3.7 billion to $4.3 billion).

The listing will be on the Mexican Stock Exchange and New York Stock Exchange, with one tranche of 20% of the shares offered in Mexico City and the remaining 80% offered as American Depositary Receipts in New York. The ADRs will be priced between $10.99 and $12.70 apiece, with each representing five shares.

The placement process began Tuesday, and it is expected that the shares and ADRs will price on Sept. 25 and be listed on or around Sept. 26, when Santander México will become the only Mexican financial institution listed on the NYSE.

Santander said it would retain control over the Mexican subsidiary and that the proceeds of the IPO would be used to bolster its own reserves, in line with accounting rules. It said the placement would translate into an increase in its core capital ratio of about 50 basis points. As of June 30, core capital stood at 10.1%.

Santander has previously floated its subsidiaries in Brazil, Chile and Poland. Eventually, it also aims to list its British subsidiary, Santander U.K., although plans for a London flotation have been put on hold in light of the weak British and European economies. A separate plan to list in Argentina has reportedly been shelved.

But the bank made clear that it plans to continue raising its profile and additional funds with further IPOs in key markets. "Our goal is to list our most significant subsidiaries within five years," Botín said in his statement.

Global underwriters and coordinators for the Mexico unit offering will be UBS Investment Bank, Deutsche Bank Securities Inc. and Bank of America Merrill Lynch.