Alfa to Propose Hylsamex Spin-off

Mexican conglomerate Alfa will present plans to spin off steel subsidiary Hylsamex to a February 4 shareholders' meeting, aiming to reduce Alfa debt to $1.3bn from $2.3bn, the company told Mexico City's stock exchange.

"The proposal we will present to our shareholders is in keeping with the corporate restructuring strategy that has guided our actions over the past three years," Alfa general director Dionisio Garza Medina said.

Alfa has been discussing the spin-off plan for years, Merrill Lynch analyst Juan Carlos Maussan told BNamericas. "It can be said that the market is more favorable to the move now, because there is more liquidity in the capital markets," he commented.

Alfa, which holds just less than 90 percent of Hylsamex, has to sell, delist or spin off the steel company because it is in violation of stock exchange rules stipulating a 12 percent minimum free-float, according to a Merrill Lynch report published last year.

The spin-off is advantageous to Alfa because it will allow the group to shed Hylsamex debt, leaving the steelmaker with the financial burden, Maussan said. After the move, Alfa will concentrate on petrochemicals through its Alpek division, aluminum auto parts with Versax/Nemak, and foodstuffs via Sigma.

Under the proposed plan, Alfa would distribute shares in two phases starting this quarter. Phase one entails distributing just under 39 percent of Hylsamex capital and the second, scheduled for first quarter next year, involves shedding the other 51 percent held by the group.