5-billion Mercadona IPO possible

Even though the crisis is hurting consumption in Spain, two major national firms could assault the Ibex 35 should they decide to go public. Mercadona and El Corte Inglés, two very different business models, would be clear candidates to jump onto the Spanish stock market as two of its highest valued companies by capitalization. After Ebro Foods fell off, other Ibex companies are in trouble should Mercadona and El Corte Inglés, two major distribution companies, decide to go public.

After the supermarket chain Dia went public nearly a year ago, the Ibex was able to find another major company dependent on the distribution sector. If average PE ratios for the biggest European countries in the sector are considered (Carrefour, Tesco, Metro and Casino Guichard), both companies would have a clear role on the index. The European sector has an average PE ratio of 10.1. Mercadona's PE ratio is around 4.787 billion euros, and El Corté Ingles's is 3.226 with respect to the 2011 fiscal year.

At these stock prices, Mercadona would become the 17th biggest company by market capitalization in Spain, putting it above Red Eléctrica, ACS and Banco Popular and putting it below Bankia. For its part, El Corte Inglés, led by Isidro Álvarez, would end up 27th (this position assumes Mercadona would be on the list, too), replacing IAG and ending up under Red Eléctrica.

Solid business

Getting through the crisis has been very different for the two companies. While while Mercadona leads its sector in size, El Corte Inglés's business is flat and its profits continue to fall year by year. In 2011 Mercadona, led by Juan Roig, obtained net profits of 474 million euros. This was 19% more than the previous year, which was enough to make the company the premier national distribution company.

According to its own predictions for this year, the company hopes to earn 490 million euros. This amount is 3.4% greater than in 2011. Further, Mercadona is going to make important investments outside of Spain this year. It has yet to mention the exact location. In any case, Mercadona's strong domestic expansion will reach its limit, forcing the distributor to seek other countries in which to continue its growth.