Issuer: Tabacalera
Amount: Pta281 billion ($1.9 billion)
Type of deal: secondary equity offering
Launched: April 27
When the four global coordinators for the privatization of the remaining 52% of Spanish tobacco group Tabacalera left the company's Madrid office on April 20 they were pretty pleased with themselves. They had just negotiated the largest underwriting discount in Spanish privatization history, 13.02% for the two institutional tranches of the sell-off. The banks in the syndicate had agreed to underwrite the sale at Pta3,340 a share.
It had been a hard job to convince Seppa, the government agency handling the sale, that such a large discount was warranted. "All of us were aware that the market was a bit shaky," recalls a senior official at Seppa involved in the negotation. "The volatility was greater than in previous offerings and so they were asking for a bigger discount." He says that they didn't ask for much above the agreed 13%.
A week later, and the global coordinators - Argentaria, BBV, Central Hispano Bolsa and Merrill Lynch - were left ruing the fact that they hadn't been more aggressive. Since the underwriting agreement had been signed, shares in Tabacalera had plummeted by over 16%.