Tender Offer: Upside TBD (at $10.72)
Cementos Pacasmayo presents a mandatory-offer-driven setup where returns will depend entirely on how the upcoming tender is structured. CPAC is a leading cement manufacturer in northern Peru. Last month, Swiss building materials giant Holcim acquired a 50.01% stake in CPAC at around $12.8/share. The stock currently sits at $10.72. There’s a chance Holcim will bid for the remaining minority stake at the same price over the next 6 months, providing 20% upside to the current trading levels. Meanwhile, the stock currently trades at $10.72/share (~20% upside).
Under Peruvian law, once a buyer crosses the 25% ownership threshold, it is required to launch a tender offer for the remaining shares.
The minimum required size of this tender is set by a specific formula. In this case, it seems the tender will have to cover at least 25% of shares outstanding, which is half of the remaining float.
[x/y] x [1-z] = minimum number of shares to be tendered
Where:
x = Percentage of securities acquired in the Target Company over the last three years.
y = Percentage of securities owned by third parties before the transaction(s) which triggered the tender offer.
z = Percentage of securities owned after the transaction that triggered the tender offer.
The price of the mandatory offer must be the greater of (1) the highest actual price the buyer paid to acquire the initial stake and (2) a fair market price determined by an independent valuation entity in a formal report. At the current exchange rate, it seems the offer price should be at least $12.8/share as of now.
On April 6, Holcim announced that it had requested Peruvian regulators to appoint an independent valuation firm to set the minimum tender price. The tender must be launched within six months of the transaction closing (it closed on March 30), or within five days after the valuation firm submits its report.
The main uncertainty here is whether Holcim goes for a full buyout or sticks to a partial tender, such as the minimum required amount. If it’s a full buyout investors would be able to lock in a meaningful gain from the current price. Otherwise, if it’s only a partial tender, the unaccepted shares will likely trade down, and the eventual return on the whole position is uncertain.
The latter option (partial tender) seems more likely. Holcim already has control of CPAC. The Swiss giant owns a large number of subsidiaries, and in emerging markets many of them are not fully owned. That said, Holcim’s other Peruvian assets (aside from CPAC) are fully owned. Holcim entered the country in 2024 via three separate acquisitions. So it’s still possible it will decide to fully consolidate CPAC as well.
CPAC’s common shares trade on the Lima Stock Exchange, while the ADRs are listed on NYSE. The ADRs represent around 8% of total outstanding shares. It’s important to note that Holcim noted in the latest filing that after mandatory offer, it intends to delist and deregister the ADRs:
Following consummation of the Public Tender Offer, Holcim intends to delist the Common Shares (traded in the form of American Depositary Shares) from the New York Stock Exchange and deregister the Common Shares under the Exchange Act.
In the partial tender scenario, ADR investors could find themselves in a tough spot, forced to either sell the portion of their position that was not accepted in the offer or convert it into Peruvian common shares, which many simply can’t or won’t hold.
Nonetheless, if things don’t work out, the downside seems to be quite limited. Half of the position will still get cashed out at a 20% premium, and the blow to the remaining stub shouldn’t be massive. CPAC traded at $7.00/share before the deal was announced. But now, a much bigger, better global operator has taken the reins, underpinning a much higher valuation. Holcim paid 8.7x EBITDA, or 7.1x post-synergies for CPAC. If the mandatory offer is launched only for the minimum required size, the trade would break-even if CPAC trades down to $8.60/share post tender (equivalent 6.6x EBITDA). This looks like a reasonable floor for the stock to settle at.
There’s also some exposure to FX fluctuations, since Holcim originally paid in Peruvian soles for its stake.
I have been following this one since the initial announcement. It seems unlikely to me that Holcim tenders for less than 50% (ie they want the whole thing) especially after the filing with intent to delist the ADR’s. Precedent transactions (Mexico, Phillipines) indicate they want to own 100% and fully consolidate. I see little benefit to them having a $200m stub out there given they are a $50B mkt cap company.
If they don’t and you’re holding a stub you can argue it is more valuable under their ownership given the operational cost savings and interest cost savings – in that case the stock might be worth more.
The spread is puzzling to me (size, FX risk) and i could be missing something but seems very attractive at this price.
My guess is the spread is the way it is due to the uncertainty. There’s a non-zero chance you end up with a deregistered ADR with an Peruvian underlying, implying a tail risk of some bad stuff happening (for example a forced liquidation of the underlying holdings – you can’t hold Peruvian stocks directly through most brokers) or some tax issues.
Not saying that is going to happen but if this was a straightforward tender for 100% the spread would not be what it is.
I called Schwab. For them it’s a selling market only. So you can hold the shares but sell only.
brokerage cost. 75bps from Schwab 50bps from local dealer.
There are some de-listing fees from the ADR.
It’s unclear if you get forced out in cash at a possibly unfavorable in cash or if the shares convert.
From what i understand the scenario you are alluding to would be the depositary bank (JPM), upon terminating the ADR program, would either deliver you local shares (if your broker allows it) or cash you out at the price of the local shares.
Yes. Again, I think that is unlikely, only happens if 1) Holcim only tenders for 25% and 2) the ADR’s are actually forcibly terminated rather than delisted / OTC listed. But this is kind of an exotic situation, you can’t rule it out 100% that you’ll be left stranded or are forced out – hence the spread exists. But FWIW I like CPAC and I own ADR’s.
cheers, i reached out to JPM ADR services to see if they are aware of anything at this point. Unlikely they will respond but will share if they do.
What happens if JPM elects to sell the stock… wouldn’t that amount of selling hurt the share price?
I believe if it came to a forced delisting – JPM would convert your ADR shares, sell them in Peru and give you the cash (and take a fee). i’d assume there would be local buyers who are aware of the spread and the price wouldn’t decline significantly.
I believe Holcim’s original purchase of 50% (from the Hochschild’s family) was made in USD. If the tender offer is based upon the price already paid does that mean the tender price will be quoted in USD?
It looks like it was done in Sols. From the share purchase agreement:
“Purchase Price. Subject to the terms and conditions of this Agreement, the aggregate purchase price for the Shares shall be S/1,850,370,000 (the “Purchase Price”), which shall be allocated between the Sellers pursuant to their respective Pro Rata Share as set forth in the Consideration Spreadsheet.”
https://www.bamsec.com/filing/110465926039944/3?cik=1221029
There’s also the dividend
The company pays its dividend at year end, so the tender offer should be fully wrapped up by then.
As a Peruvian, I just wanted to shed some light to the political risk currently at play with all peruvian stocks.
There is currently an election ongoing where an extreme left-wing candidate will most likely make the runoff. While I don’t think he would be able to materialize his proposals in the long-run, expect severe capital outflows should Sanchez win the election in early June.
This would likely translate in lower stock prices for several months or even years, the Fx will also tank. Overall a similar scenario to what occurred in the 2021 election, you can check up on this.
If you’re interested only for the arbitrage, this risk is relevant. If you’re willing to hold your stocks for several years, I will always recommend investing in Peru. The country is unbelievable resilient macroeconomically and multiples are low across the board. Moreover, CPAC business wise is great, runs a local monopoly in the North what’s probably the fastest growing region of Peru.
Thanks for that comment, Jose. OT but any opinion on what that might mean for Cerro de Pasco Resouces’ tailings processing project? In theory, it should be an all-weather development that is a win-win for all parties.
I don’t have a particular view on the project, havent looked into it sorry. What have you seen that’s attractive to you?
Expropriation I’d discard it as a risk for now. He needs congress and he doesn’t have the votes. But the ministry of mining is 100% under his control, these guys give all approvals. So I’d say the main risk is that compliance requirements or timelines could increase. But will this be significant? Its hard to tell.
On one hand, yes left-wing candidates here have historically also run on an anti-mining campaign, theyre just anti business in general. On the other, compliance requirements to formal mining operations have only increased since 2011 and we already come from a left-wing govt.
This can always change but I’m leaning more towards business as usual should Sanchez win.
Strong Q1. Revenue up 11%, EBITDA +30%. No news re tender.
~10% bump today. Now trading at just over $12. Thinking of selling some off and buying back if there’s a dip.
Oh, apparently Holcim filed an amended Sched 13D declaring their 50.01% ownership, and plans for a public tender for “any and all issued and outstanding shares”. No price and/or conditions yet from what I can see.
Fujimori won the election
I ran across something that seems to indicate that the method for picking the independent valuator changed on July 4. It appears that the government will not appoint the valuator in future transactions, but the company will do so. Can anyone confirm this? Does anyone know if this change will apply to Holcim since a valuator has not yet been appointed or will it still fall under the old rules since Holcim’s announcement, etc were made prior to July 4.
Can you share source pls ?
I posed a question to Claude, this is a portion of its response:
“July 3–4, 2026: The SMV published Resolution SMV N° 008-2026-SMV/01, a significant overhaul of the OPA regulation, effective July 4, 2026. Notably, it eliminates the SMV-run public selection process for the valuation entity — under the new rules, the offeror (Holcim) contracts the valuation firm directly, certifying via sworn statements that the firm has relevant experience and no conflicts.”
I have not reviewed the resolution itself or know for certainty that it exists.
It seems that the price setting mechanism has remained the same: “must not be lower than the highest price the obligors would have paid for the same securities in the transactions that gave rise to the obligation.” (translated by Chrome).
So the main change is that the valuator is picked by Holcim and not the regulator? This probably increases the odds the fair value won’t be set higher than the price paid for the stake purchase. But that was kinda expected anyways?
https://www.garrigues.com/es_ES/noticia/peru-modificaciones-reglamento-opa-opc-reconfiguran-mercado-valores-elevan-exigencias
CPAC has filed a lengthy response to the Peruvian regulator’s information request. The key update is that the final price Holcim paid for its controlling stake was lower than previously disclosed due to adjustments for cash and debt fluctuations and a dividend payment. This reduced the price paid from the initially reported S/1,850,370,000 to S/1,640,327,224. At the current exchange rate, that is a drop from ~US$13/ADR to US$11.4/ADR.
The document does not spell this out clearly, and I was not able to find how Peruvian law treats this specifically, but there is a decent chance the floor for pricing the mandatory offer will be US$11.4 instead of US$13. Any insights are appreciated.
The filing also confirms that Holcim, not the regulator, gets to pick the valuation firm under the recent rule changes, and that search is still ongoing. This makes the odds of the buyout price landing above the floor low.
https://www.bamsec.com/filing/121390026078711/2?cik=1221029
In one precedent transaction in Peru (CYPC/Luz del Sur), the mandatory offer price for the remaining shares was also adjusted for the cash/debt fluctuations, dividends, and time value of money (at TIPMEX rate), moving from US$8.6881/share to US$8.5346/share. The valuation firm’s presentation (see slide 6, in Spanish) is available here: https://documents.bvl.com.pe/empresas/alertas/2Informe_LuzdelSur_KallpaSAB_15ene2021.pdf
Overall, the floor for Holcim’s offer seems likely to sit around US$11.4/share, plus a minor positive TIPMEX adjustment and some FX movement. With the stock already trading at US$11.7/ADR, the odds of further upside seem minimal. I’m removing this idea from active cases, with 9% gain in three months.
I may be missing something, but isn’t the key distinction that S/ 1,640,327,224 represents the amount paid to ASPI’s sellers, rather than the total consideration attributable to the CPAC stake? Final Purchase Price is defined as (a) the Purchase Price, minus (b) the Company Financial Indebtedness Payoff Amount, minus (c) any Excess Transaction Expenses, so I’m basically saying that (a) would be more representative of what CPAC’s minority holders could be receiving.
Annex A-7-10 shows S/ 163,000,000 of ASPI-level debt. There are about S/ 50,000,000 in adjustments, so the sum of both gets you close to the S/ 210,000,000 difference between S/ 1,850,370,000 and S/ 1,640,327,224.
The Electro Dunas transaction (https://www.smv.gob.pe/Uploads/2019157983-InformedeValorizacionElectroDunas.pdf) seems comparable: to derive the value attributed to the underlying Electro Dunas stake, Macroinvest started with the equity consideration paid for the holding company, Dunas Energía, added back the holding company’s total liabilities, and then subtracted its assets other than the investment in Electro Dunas (page 82).
Wouldn’t a similar look-through approach suggest that ASPI-level debt (b) should be added back to the Final Purchase Price to derive the implied price paid for CPAC, rather than treating the S/ 1,640,327,224 paid to the sellers as the full transaction value?
Some thoughts: I think Holcim and ASPI are deliberately obfuscating deal details and it’s good to see the regulator asking some questions.
First of all, as far as I can see, as per the merger agreement, the December CPAC dividend was actually part of the deal and not counted as ‘leakage’:
—
it being understood and agreed that the cash dividend in the declared aggregate amount of S/190,300,410.65 paid by CPAC on or about December 11, 2025, and the use by the Company of the cash it received from such dividend and any cash held by the Company on the date hereof and any income earned therefrom to pay Indebtedness of the Company, other ordinary expenses of the Company and make distributions to the Sellers shall not be a breach of this provision nor be deemed to be Leakage;
—
And second: the final purchase price is defined as:
“Final Purchase Price” means an amount equal to (a) the Purchase Price, minus (b) the Company Financial Indebtedness Payoff Amount, minus (c) any Excess Transaction Expenses.
with indebtedness defined as: ““Company Financial Indebtedness” means all monies borrowed by the Company from Banco de Credito del Perú, together with any unpaid interest, prepayment penalties, “breakage” costs, premiums, expense reimbursements or similar costs or expenses, if any, due or payable as a result of the satisfaction or prepayment thereof.”
Note that ‘company’ means ASPI here, not CPAC. So there was (probably?) some debt at the ASPI level that is excluded in the ‘final amount paid to the sellers’. Question is how much? Yet another piece of the puzzle that deliberately is not being disclosed so far. CPAC / ASPI and Holcim refuse to disclose a price paid ‘per CPAC’ share and only share the amount paid to the sellers of ASPI.
I think the market is rightfully scared of a tender around $11.40 but at this point market participants just don’t have enough information to determine what price Holcim paid per CPAC share. The company should disclose how this adjustment was made. I believe at least part of it is caused by debt at the ASPI level.
Didn’t they disclose that CPAC was valued at 9 times EBITDA? BTW, they announced another greater quarter.
EV is a valuation metric representing the total value of an operating business without regard to its financing structure (that is, independently of CPAC’s debt). Holcim clarified that EV is not the Transaction purchase price; rather, it is the starting point from which Equity Value is calculated after applying valuation adjustments (described in the response to question 5 below).
Holcim determined the USD 1.5 billion EV using a standard enterprise valuation methodology based on EBITDA multiples, together with an arm’s-length negotiation with the sellers. EV was calculated by applying an approximately 9.0x multiple to CPAC’s last-twelve-month (“LTM”) EBITDA, which was S/ 569 million as of July 2025. Applying that multiple (S/ 569 million × 9.0) resulted in an EV of approximately S/ 5.1 billion.
Thanks for the feedback. Maybe I rushed the conclusions here. I agree the details are obfuscated, and it feels a bit intentional.
Annex A-7-42, which has the most detailed balance sheet information for ASPI, shows the sum of holdco debt and transaction costs lining up cleanly with the gap between the purchase price (S/ 1,850,370,000) and the final purchase price (S/ 1,640,327,225).
So the gap is S/ 210,042,775.
Here’s how it could line up:
S/ 44.051m: ASPI financial obligations (current)
+ S/ 116.320m: ASPI financial obligations (non-current)
+ S/ 9.339m: additional BCP debt
+ S/ 73.982m: transaction expenses
+ S/ 1.051m: discovered leakage
− S/ 34.700m: US$10m threshold offset (per SPA)
= S/ 210.043m
If that is the case, maybe the odds that the floor price for the mandatory offer will be around $13/ADR are higher than assumed.
Agreed.
Last filing made it crystal clear that the adjustments were made at the ASPI level and no changes were made to the CPAC valuation itself.
I think the floor is solidly set now. Just a question of timing and possible upside of the alternative valuation. Still like it quite a bit.
Yes, thanks. That is a welcome update.
Two minority shareholders filed an inquiry with the Peruvian regulator, forcing the company to clarify the purchase price for ASPI’s 50.01% stake in CPAC. Holcim responded and confirmed that S/1,850m of the total represented the equity value attributed to the stake, with the remaining S/210m reflecting ASPI-level debt and excess transaction expenses. That resolves the ambiguity around $13/ADR as the floor price.
https://www.bamsec.com/filing/121390026093506?cik=1221029
Just adding my 2 cents. El Niño usually brings heavy rain and flooding in the North of Peru (ie, CPAC’s geographical monopoly).
While catastrophic, demand to rebuild stuff will be significant and any serious valuation should consider this. Check the uptick in its valuation during heavy rainfall in 2017 if I remember correctly.
This El Niño is forecasted to be the worst in recorded history, we’re currently 6-8 celsius above our usual temperature in Lima but the rainy season hasn’t yet started in the North. Our summer time is when the heavy rainfall should begin (Dec-March).
This is not guaranteed to be considered, perhaps a nice possible upside.
Holcim has requested a 60 business day extension to launch the mandatory tender. The clock would start at the earlier of the designation of an entity that would carry out the tender or 5 business days after the valuation report is delivered. The valuation firm still hasn’t been appointed yet. I guess the tender launch will get delayed well beyond the current end of September deadline.
new filing
declared previous process void?
Yeah, not sure how to read this. Under the new rules, Holcim itself has to choose the valuation entity, but those rules only took effect in July. So maybe, since the search process had started earlier under the old rules, the regulator kept running it until now?
The valuation firm has finally been appointed. As I understand, this starts the clock on Holcim’s 60-business-day extension to launch the mandatory tender offer. The tender could still come earlier if the valuation report is delivered before the 60-business-day deadline, as Holcim would then have five days from delivery to start the offer.
The floor price now looks pretty firmly set at around $13/ADR, with some upside optionality from the independent valuation. CPAC currently trades at around $12.6.
https://www.bamsec.com/filing/121390026096551?cik=1221029