J.P. Morgan leads
Chile’s record IPO

As global coordinator on mall giant Cencosud Shopping’s $1.05 billion IPO, J.P. Morgan opens the door on large-scale initial public offerings in Latin America equity markets.

August 8, 2019

Cencosud Shopping, the largest owner and operator of retail malls in Chile and the second largest owner of real estate in all of South America, has shown flair in attracting visitors to its shopping centers – and investors to its market debut. The $1.055 billion IPO set a record for the Santiago exchange, exceeding expectations, with $3 billion in investor demand, at a price of $2.24 per share, equivalent to 1,521 in Chilean pesos.

“We knew that due to the large size of the transaction we were entering a totally unknown territory for the local market,” said Alfonso Eyzaguirre, J.P. Morgan’s senior country officer for Chile. “After finishing the process, my conclusion is that for well-managed companies with good assets, consolidated businesses and attractive growth profiles, there will always be funds available to invest, even in very large transactions.”

With a presence in Chile, Colombia and Peru, the nature of Cencosud’s Shopping assets were a draw because it has extremely stable cash flows and the company’s real estate operations are benefitting from lowering interest rates, said Eddy Allegaert, head of Latin America Equity Capital Markets. He believes that Cencosud Shopping’s IPO will be harbinger for other large-scale IPOs, noting, “Other listed companies could turn to the equity markets to carve-out subsidiaries that have sufficient scale and a business of a different nature than the parent company.”

While shopping malls in the U.S., for example, have been struggling along with their retail tenants due to the proliferation of online shopping, Cencosud Shopping’s properties benefit from the real estate adage that location is what’s most important.

Cencosud locates its malls in urban, retail areas where there is already a lot of traffic, according to bankers. The properties sit amid busy areas for entertainment, such as movie theaters, restaurants and other extensive commercial activity. Those areas are destinations in their own right, so the Cencosud properties function as retail centers, as well as areas to entertain and socialize.

“Along with being a major owner of mall locations, Cencosud also owns many retail formats – such as supermarkets, department stores and home improvement centers – a factor that provides the malls with anchor stores to complement the retail mix of the various locations,” said Allegaert, underscoring the company’s stable financial position.

The sign of market confidence in Cencosud Shopping can be seen in the IPO’s investor profile, which is largely derived from conservative investors. Chilean pension funds accounted for 58.5% of the IPO; local financial institutions, another 11.7%; and foreign investors, 13.3% with a mix of other investors making up the balance.

“The company’s founder Horst Pullman believed in offering the issue to international investors, as well as those in Chile,” Eyzaguirre noted. “I agreed with his view and we were able to use our local distribution strength, along with our global platform, to meet those objectives.”

J.P. Morgan set up a nine-day roadshow, taking two management teams for presentations in New York and Boston, Europe, Canada and Latin America. Overall, they met with dozens of investors both in one-on-one sessions and group events.

The IPO demonstrates the strength of J.P. Morgan’s global platform and continued leadership, Eyzaguirre said. It ranks as the number one bookrunner for global real estate equity offerings over the last decade and is also ranked number one for international bookrunning of Latin America equity offerings since 2017. It has led five of the six largest IPOs in Chile, including the Cencosud transaction.

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