F-1/A: BBB Foods Inc. Files Amendment for IPO, Eyes New York Stock Exchange Listing

BBB Foods Inc., the parent company of Mexican hard discount grocery retailer Tiendas 3B, has filed an amendment to its Form F-1 registration statement for an initial public offering (IPO) of its Class A common shares, with plans to list on the New York Stock Exchange under the ticker symbol TBBB.

Summary

• BBB Foods Inc. has filed an amendment to its Form F-1 registration statement for an IPO of Class A common shares.
• The company intends to list its Class A common shares on the New York Stock Exchange under the symbol TBBB.
• The IPO includes an offering of 28,050,491 Class A common shares by the company and 5,610,098 Class A common shares by selling shareholders.
• Underwriters have an option to purchase up to 5,049,088 additional Class A common shares from the selling shareholders.
• The estimated initial public offering price is between US$16.50 and US$17.50 per Class A common share.
• Following the offering, the company will have three classes of common shares: Class A, Class B, and Class C.
• Bolton Partners Ltd., affiliated with the founder, will own all Class B common shares and a portion of Class C common shares, representing approximately 46.4% of the combined voting power.
• Capital International Investors has indicated an interest in purchasing up to US$95 million in Class A common shares in this offering.
• The company intends to use the net proceeds from this offering for the repayment of indebtedness, including all of the Promissory Notes and the Convertible Notes, and for general corporate purposes.

Sentiment

Score: 7

Explanation: The document is generally positive, highlighting the company's growth, market position, and future strategies. However, it also acknowledges risks and challenges, providing a balanced view.

Positives

• The IPO will provide capital for debt repayment and general corporate purposes.
• Listing on the New York Stock Exchange could increase the company's visibility and access to capital markets.
• Interest from Capital International Investors indicates strong investor confidence.

Negatives

• Selling shareholders are offering a significant portion of the shares in the IPO, which could dilute the value for new investors.
• Bolton Partners Ltd.'s control over Class B shares will give them significant influence over company decisions, potentially limiting the influence of other shareholders.
• The company is a foreign private issuer, which means it is subject to reduced public company disclosure and reporting requirements.

Risks

• The company's success depends on its ability to compete effectively in the Mexican grocery market.
• Economic factors in Mexico could reduce customer spending and impact the company's profitability.
• The company's growth depends on its ability to successfully lease, obtain permits for, and adapt real estate spaces for stores and distribution centers.
• The company is subject to risks associated with its leased property portfolio.
• The company's success depends on its executive officers, its regional management and other key personnel.
• The company has a negative working capital.
• The company faces the risk of product liability claims and adverse publicity.
• The company is subject to the Mexican federal anticorruption laws, and similar worldwide anticorruption, anti-bribery and anti-money laundering laws.
• The company is subject to risks due to breaches of the Federal Law on Protection of Personal Data Held by Private Parties (Ley Federal de Proteccin de Datos Personales en Posesin de los Particulares).
• The company is subject to the Mexican Federal Consumer Protection Law.
• The political situation in Mexico could negatively affect the company's operating results.
• Fluctuation of the Mexican peso relative to the U.S. dollar could adversely affect the company's financial condition, its ability to repay debt and other obligations and results of operations.
• Security risks in Mexico could increase, and this could adversely affect the company's results.
• Changes in global trade policy could adversely affect the company's business.
• High inflation rates may adversely affect the company's financial condition and results of operations.
• The company is a British Virgin Islands company and it may be difficult for you to obtain or enforce judgments against us or our executive officers and directors in the United States.
• The company has identified material weaknesses in its internal control over financial reporting and, if it fails to remediate such deficiencies (or identify and remediate any other material weaknesses) or otherwise fail to maintain an effective system of internal controls, it may be unable to accurately report its results of operations, meet its reporting obligations or prevent fraud.

Future Outlook

The company aims to continue expanding its store network, developing new private label product lines, increasing sales of spot products, and introducing new categories of products and services.

Management Comments

• The 3B name, which references Bueno, Bonito y Barato a Mexican saying which translates to Good, Nice and Affordable summarizes our mission of offering irresistible value to budget savvy consumers through great quality products at bargain prices.

Industry Context

The Mexican formal grocery market is large and growing, with approximately US$124 billion in annual sales for 2022 and projected to grow at a 7.6% compounded annual rate from 2022 to 2027, according to Euromonitor.

Comparison to Industry Standards

• The company's gross profit margin for 2022 was 15.1%, compared to gross profit margins of 28.1% of La Comer, 23.4% of Walmart de Mxico (Walmex), 22.9% of Chedraui and 22.1% of Soriana.
• Hard discounters, such as Tiendas 3B and Tiendas Neto, only represented 2.3% of sales in the Mexican grocery market for 2022, while hard discounters in Germany, Poland, and Turkey represented 23.6%, 33.6%, and 24.1%, respectively, of their corresponding grocery markets annual sales in 2022.

Related Party Transactions

• The company has entered into several related party transactions, including the issuance of Promissory Notes and the payment of a service fee to affiliates of Quilvest Capital Partners.
• The company has entered into a reverse factoring arrangement with Banco Santander Mexico, S.A. (Santander) pursuant to which a participating supplier receives the original invoice amount discounted at an agreed rate, and the company pays Santander the original amount of the invoice within 60 days after the supplier collects the invoice from Santander.

Stakeholder Impact

• Shareholders will be impacted by the IPO, which could dilute the value of their shares.
• Employees may benefit from the company's growth and expansion plans.
• Customers may benefit from the company's continued focus on providing value for money.
• Suppliers may benefit from the company's growth and increased purchasing power.
• Creditors will be impacted by the company's plan to use the IPO proceeds to repay debt.

Next Steps

• The company will proceed with the IPO process, including pricing and allocation of shares.
• The company will list its Class A common shares on the New York Stock Exchange under the symbol TBBB.
• The company will use the net proceeds from this offering for the repayment of indebtedness, including all of the Promissory Notes and the Convertible Notes, and for general corporate purposes.

Key Dates

Keywords

IPO, Class A common shares, BBB Foods, Tiendas 3B, Mexican grocery market, Initial public offering, Retail, Mexico, NYSE, TBBB