Spain's Banco Santander SA is set to raise more than $4-billion (U.S.) in a listing of shares from its Mexican unit to help the bank shore up its operations in the ailing Spanish economy.
The offering, which would be the largest ever of a Mexican company, will be priced at 31.25 pesos ($2.39 Canadian) per share in Mexico, two people familiar with the deal told Reuters on Tuesday.
The figure puts the price in the middle of the range of 29 to 33.5 pesos set by the bank earlier this month, beating the predictions of wary investors.
Santander, Spain's largest bank, is seeking to raise up to $4.3-billion (U.S.) by listing 24.9 per cent of its Mexican unit to help bolster its Spanish base. The offering is the second largest in the United States this year behind Facebook.
The company declined to comment on the pricing.
The transaction is in two tranches: one in Mexico, for 20 per cent of the shares in the global offering, and one outside Mexico, including the United States, representing 80 per cent.
The U.S. shares, each the equivalent of five local shares, are priced at $12.18 each, U.S. market sources said. That would bring the total amount raised to some $4.126-billion.
Carlos Alonso, a trader at brokerage Interacciones in Mexico City, said the pricing would likely help the local stock to rise on its first day of trading on Wednesday.
"If the stock doesn't fall, given the size of the issue, which was really big for what we're used to here in Mexico, I think there could be interest from other companies once they see there is appetite for new names," Mr. Alonso said.
The proceeds will be used to boost the capital levels of Santander in Spain, where it is relatively healthy but has taken hits from writedowns in the battered Spanish property sector.
Banking analysts praise Santander Mexico as a lucrative bank with solid growth prospects in a country set to grow at a healthy pace this year and next.
Mexico's economic growth is forecast at around 4 per cent this year and about the same in 2013.
Santander Mexico stands to benefit from a growing middle class that is just starting to open bank accounts and take out loans for the first time, in contrast to more developed banking systems in countries like Brazil and Chile.
The division generated 12 per cent of Santander's overall profit in the year through June 30, based on just 4 per cent of the bank's worldwide assets.
"Even if you have a scenario where the economy stalls a bit, you still have banks having very likely more demand for their products as new customers are seeking their first banking relationship," said Maclovio Pina, senior equity analyst at Morningstar Inc, an investment research firm.
The listing was seen as a test of investor appetite for Mexico, he said, as investors seek alternatives to other emerging markets like Brazil and China.
"I think it will be a good indicator. … It might entice other companies to make new offerings, be they primary or secondary, seeing that there is enough institutional (investor) interest," he said.
The flotation is the latest spinoff by Santander of one of its local units. Its Brazilian unit raised $8-billion in 2009.
The Mexican unit will begin trading on the New York Stock Exchange on Wednesday under the ticker BSMX.
The IPO underwriters include UBS, Santander, Deutsche Bank and Bank of America Merrill Lynch.