Seventh Global Annual Private Equity Conference International Finance Corpotation

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Seventh Global Annual Private Equity
ConferenceInternational Finance Corpotation
Is The IPO Market Back

• Home builder Homexs Initial Public Offering on
  the Mexican and NY Stock Exchanges

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(No Transcript)
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Homex Profile

• Desarrolladora Homex, S.A. de C.V. is a
  vertically-integrated home development company
  focused on affordable-entry level and
  middle-income housing in Mexico.
• The Company is the fastest growing of the major
  home developers in Mexico, based on the
  percentage increase each year in number of homes
  sold, revenues and net income.
• Homex is one of the most geographically diverse
  homebuilders in the country.
• Homex continues expanding its operations across
  Mexico, anchored by its strong and highly
  experienced management team and its effective use
  of state-of-the-art technology.

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ZN Mexico Trust Investment

• ZN Mexico Trust made its initial investment in
  Homex in 1999.
• ZN Mexico Trust made two follow-on investments in
  2001 and 2002.
• ZN Mexico invited Equity International Properties
  (EIP) to co-invest in 2002.
• In June 2004 Homex performed a successful IPO in
  the Mexican and NY stock exchanges.

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Homex as a Private Equity Investment

• ZN Mexico Funds participation in Homex guided the
  company to meet the highest standards in
• Financial Planning
• Access to financial services
• Introducing reporting and control mechanisms
• Corporate Governance
• Strong board of directors institutional and
  independent
• International standards of accountability and
  transparency
• Full SEC registration in the NYSE and on Mexican
  stock exchange

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The Transformation

• Homex in 1999 at the time of Investment
• Sold 7,262 houses annually
• Had 1,905 employees
• EBITDA of US 18 million
• Had revenues of US 111 million
• Time of construction per home of 39.5 weeks
• Limited cash flow generation

• Homex as of the Fourth Quarter of 2004
• Sold 21,053 houses annually
• Had 11,678 employees
• EBITDA of US 112 million
• Had revenues of US 473 million
• Time of construction per home of less than 7
  weeks
• Increased cash flow generation by 9 times

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Homex Growth
Units
Sales (USD MM)
Net Debt / EBITDA
EBITDA (USD MM) Margin()
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Exit Environment

• Strong Operating and Financial Performance
• Units increased from 4,792 in 2001 to 13,396 in
  2003
• Revenues jumped from US70 million in 2001 to
  US251 million in 2003
• EBITDA margin increase from 16.8 in 2001 to
  21.9 in 2003
• Market Condition prior to IPO
• Mexican Bolsa up 40 during 2003 and 21.8 from
  January to June 2004
• Window of opportunity opend for new offerings in
  housing industry in Mexico (IPO of Sare and Urbi)
• Mexicos country risk at one of the lowest levels

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ZN Mexicos Exit Strategy

• Position Homexs unique business model based on
  the success of other companies Walmart,
  Starbucks, Dell, ARA.
• Position Homex succesfull growth story and
  potential to maintain growth when compared with
  industry peers.
• Not fight for the highest initial price but look
  for the broadest distribution of stock.

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BMV vs NYSE

• Listing in Mexico Advantages Disadvantages

• Faster Process
• Cheaper Offering

• Lower Stock Liquidity
• Lower Valuation
• Limited acces to specialized industry investors

Listing in US Advantages Disadvantages

• Wide Distribution
• Full Listing
• Higher Stock Liquidity

• Full SEC Disclosure
• Expensive Process
• Continous Reporting Costs

Registered Offering

• Less Complicated
• Less Reporting

• Illiquidity in US
• Limited distribution of stock

144-A Ordinary Shares
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Homex IPO

• On 29 June 2004, Homex conducted its dual initial
  public offering (IPO) on the New York Stock
  Exchange (NYSE HXM) and on the Mexican Bolsa
  (HOMEX).
• The offering was for US 175.7 million and was
  allocated approximately 73.2 to International
  investors and 26.8 to Mexican investors.
• The Company raised US 143.9 million (i.e.
  primary portion) and US 31.8 million went to
  existing Shareholders (i.e., the secondary
  portion).
• The net proceeds from this offering were used to
  acquire land, repay indebtedness and for general
  corporate purposes.
• The offering was 10.0x oversubscribed and was
  priced at the high-end of the offering price
  range at US 15.8 per ADS.
• Citigroup and Merrill Lynch conducted the US and
  international offering, Accival and IXE conducted
  the Mexican offering. The four investment banks
  were selected from a beauty contest of more than
  10 banks.

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Homex Stock Performance since IPO
Homex (NYSEHXM) Volume Chart
Homex (NYSEHXM) ADR Price Chart
Source 1. Yahoo Finance April 28, 2005
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Homex Stock Performance since IPO
Indexed Homex Vs DJI and IPC (US)
Source 1. Yahoo Finance. April 28, 2005
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Why was Homex able to list on the Public Markets

• Family was always open to change and improve its
  operations.
• Cash flow generation became the name of the
  game.
• Constant upgrading of management team.
• Creation of a unique business model based on the
  success of other companies Walmart, Starbucks,
  Dell, ARA.
• Family let financial investors run financial
  restructuring and IPO process.
• Best governance and corporate practices possible.
• Homex is getting ready for a new stage of growth.

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What is required for an IPO

• Company needs to be among the best in class in
  its industry.
• Needs to show substantial growth.
• Use of proceeds primary used for growth, not to
  pay debt.
• For a registered listing size of offering at
  least US 150 MM.
• For Local offering minimum of US 75 MM.
• Unless company has superb numbers against peers,
  expect an important discount in multiples.
• Do not fight for the highest initial price but
  look for the broadest distribution of stock.