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

In the case of WAL-MART DE MEXICO V (FRA:4GN), which is the leader in Food Retailing in Mexico with a 50% market share, I would not expect some PE fund to buy the company out. I would expect Wal-Mart Stores (owner of 68.5% of the company’s shares) to take it private. Mexico has a fast growing middle class, which is the key for Wal-Mart’s success. The company is growing its top line at a 10% YoY peace with a return on invested capital (ROIC) well above 20% (a ROIC of 22.5% is expected for 2013). Selling for 2013 x14 EV/EBITDA and 25x P/E, the company is an attractive target for its main shareholder.

The valuation argument for Latin American equities is getting less and less attractive. Companies are doing great but valuations are doing still better. Multiples are about 25% higher YoY, and a higher entry point always means higher risk. I am sure Mexico will continue leading the M&A landscape in Latin America this year, but I am also sure premiums are poised to shrink. Out of the three great companies mentioned above I would go for Grupo Televisa SAB (ADR) (NYSE:TV) purely for valuation reasons. After all and as I usually say, “Price is What you Give and Value is What you Get”.

The article Mexican M&A Candidates originally appeared on is written by Federico Zaldua.

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