Colombia's Davivienda To Test Changed Waters With Share Sale

Bank plans to sell $420 million in secondary stock placement

Funds will be used for international expansion

Market turbulence could affect demand for share sale

Banco Davivienda SA (PFDAVVNDA.BO), Colombia's third largest lending institution by assets, is preparing a share placement that will likely illustrate the decline in investors' appetite for new Colombian shares over the last year.

Davivienda's secondary share placement, which could be for as much as $420 million, is likely to be well-received by investors, but it will certainly pale in comparison to the bank's initial public offering 12 months ago.

Demand for Davivienda's $228 million IPO last October hit 13 times the amount offered. 

The sale represented the first IPO in Colombia in more than three years. In its debut, Davivienda's shares climbed a whooping 36%. Back then, Colombian stocks were among the top performers in the world, on track to climbing nearly 30% for 2.010.

But times have changed. Colombian stocks, like other emerging markets, have been pummeled by fears of a twin sovereign-debt and banking crisis in Europe, not to mention a potential double dip recession in the U.S. Colombia's main index is down about 11% so far this year.

"We think demand will be high, but certainly not like we saw last year," said Davivienda Chief Executive Efrain Forero in a telephone interview. 

"We can't rule out that things will be more difficult in the near future."

Forero said the bank wanted to have the money from the share sale in hand as some acquisition opportunities may emerge in the coming months. 

The bank's overseas expansion plans are focused on Peru, Chile and Central America, he said.

Colombian companies have been issuing massive secondary share placements, hoping to take advantage of the country's growing attraction for international investors. 

The local stock exchange estimated that around $4 billion have been sold in secondary share placements this year, a figure that could max out investors appetite for new sales.

"The market has certainly changed over the last year," said Juan Camilo Dauder, a financial-sector analyst with investment firm Celfin Capital. 

Dauder, however, said he expects Davivienda to easily sell the full amount offered, although he agreed that demand is unlikely to reach the same levels seen in 2.010.

The bank is expected to offer the shares at COP20,000 ($10.50).

The bank will have to compete with other share sales slated to be completed before the end of the year. 

Grupo de Inversiones Suramericana SA (GIVSY, GRUPOSURA.BO), Colombia's largest financial conglomerate, is preparing a $1 billion share placement to pay for the $3.7 billion acquisition of the Latin American pension unit of ING Groep NV (ING, INGA.AE).

Utility company Empresa de Energia de Bogota SA (EEB.BO) is also preparing a share placement for the end of the year.

Despite a crowded field for new share placements, Celfin Capital maintained a target price for Davivienda at COP29,750 for the end of 2.012. 

The bank's strong credit growth and efforts to add new clients are likely to pay off quickly, Celfin said. 

"The bank is our top pick in the Andean region," the firm said.