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Grupo Televisa SAB (ADR) (TV), Grupo Aeroportuario del Sureste (ADR) (ASR): Mexican M&A Candidates

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The market is long Mexico. During the first three months of this year, the country has led the Latin American pack for share sales and M&A activity. The reasons are to be found in Mexico’s renewed growth prospects. The IMF expects the country to grow by 3.5% this year and next as Mexico’s export-led economy benefits from an increasingly active US economy. According to Dealogic, in 1Q 2013 Mexico has concentrated 35% of all the M&A deals that took place in the Latin American region – leaving behind Brazil with 25% of deal volume.

Source: Dealogic & Financial Times.

When I learned about the Dealogic data, I started looking for US-listed Mexican companies that could be M&A targets going forward. The companies I found as possible targets were: Grupo Televisa SAB (ADR) (NYSE:TV) Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR), Grupo Televisa SAB (ADR) (NYSE:TV) and WAL-MART DE MEXICO V (FRA:4GN). In the following paragraphs I will try to see if these companies could really represent good targets going forward.

Grupo Televisa SAB (ADR) (NYSE:TV)

Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) is a Mexican airport operator with concessions to operate, maintain and develop most airports in the southeast of Mexico. The company is growing its top line relatively (to its industry) fast. In 2013, revenues are expected to grow by 8% year over year, and the company is always increasing its profitability levels. I am sure there are many private equity (PE) groups that would be willing to take Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) private. Airport operators produce steady revenues and stable earnings streams. They are perfect candidates to be leveraged up (Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) should end 2013 with $2 billion negative net debt). That said, the current valuation seems already overly rich at 2013 16x EV/EBITDA and 29x P/E. Great candidate for a levered transaction, but I don’t think there is much room for further equity appreciation.

Grupo Televisa SAB (ADR) (NYSE:TV), the Mexican broadcaster, is another potential M&A candidate. The company owns a leading broadcasting franchise and has created a leading pay TV franchise through consolidating different companies (Sky Mexico and Cable). Besides, Grupo Televisa SAB (ADR) (NYSE:TV) has been growing its top line at a +10% YoY rate and lowering its debt level from 1.5x EBITDA in 2011 to less than 1x today. Even as a great M&A candidate, the company is not especially cheap. Grupo Televisa SAB (ADR) (NYSE:TV) trades at 2013 8.3x EV/EBITDA and 22x P/E.
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