DEALSOFTHEYEAR
Maxis certainly did, becoming the country’s fifth-largest listed Allianz ended up disposing of 3.2 billion H-shares, while
stock. The deal size virtually ensured its success, as local investors or American Express sold 638 million shares, half of each banks’
those with an index exposure to the country were obliged to buy the respective stake. It was such a smoothly executed sale that even
shares. rivals reluctantly applauded Goldman Sachs for conducting the
As a stock its main appeal was a good dividend, given that Maxis deal so smoothly despite attempted shorting by hedge funds.
had stripped out its high-growth Indonesia and India assets from the The strategy also proved to be a rather useful dry run for
listing company. Goldman Sachs. It followed with its own US$1.09 billion share sale
Sinopharm, on the other hand, was the first company from China’s in ICBC just over a month later, pricing the shares at a valuation
pharmaceutical sector to conduct an international IPO. It also offered a 26% higher than that achieved by Allianz and American Express.
major growth story.
Beijing intends to pump money into health care, which will greatly
benefit the pharmaceutical firm. Its earnings are already rising at 40% BESTEQUITY-LINKEDOFFERING
a year. Larsen&ToubroUS$600millioncombinedequityandconvertible
This background resonated with investors. The retail portion of bondissue
Sinopharm’s IPO ended a whopping 570 times oversubscribed with Bookrunner:Citi
HK$489 billion in demand, the second-highest level on record. The
institutional portion also received heavy demand.
Sinopharm priced its shares at HK$16, the top of the range, valuing While it has been a relatively busy year for convertible bond offer-
the company at 19 to 25 times 2010 forecast earnings. It subsequently ings, it was challenging to point to any individual deal that can
exercised its green-shoe option to bring the total IPO size to HK$10 bil- truly state to have done something different.
lion. Ultimately Asiamoney plumped for Larsen & Toubro’s (L&T’s)
The shares then closed at HK$18.52 on the first day of trading, a concurrent US$200 million convertible bond and US$400 million
15.75% rise that rewarded investors but was not so high that it looked qualified institutional placement of shares.
as if Sinopharm had left money on the table. The combined issue for the engineering and construction com-
The company’s stock has done well since, and closed at HK$26.5 on pany was unusual in that it effectively offered participating
December 11, up 65.6% on the IPO price. By contrast, Maxis’ shares investors cheaply priced convertible bonds as long as they also sub-
were priced at RM5 but have since traded between RM5.3 and RM5.4. scribed to the expensively priced equity.
Maxis’ re-listing was good for Malaysia, but in our view Sinopharm The structure was due to a vagary of India’s stock market.
was ultimately the better deal. Market regulator Sebi does not allow companies to price secondary
equity offerings at less than a 1.1% discount to the previous two
weeks’ average trading price.
BESTEQUITYOFFERING The idea is to protect investors from companies diluting their
Industrial&CommercialBankofChina(ICBC)HK$14.9billion share base, but in a static or dropping market it makes it next to
(US$1.92billion)privateplacement impossible to issue new shares. That was the case in October, so to
Bookrunner:GoldmanSachs ensure that L&T could appeal to new investors Citi packaged cheap
convertible bonds with a new equity issue. While the structure is
not utterly unique it is rare; the last Asian issuer to do a similar deal
Even as the world’s capital markets staggered at the beginning of 2009, was Yue Yuen in 2006.
equity funding was still needed, especially by the needy and desperate. L&T ended up pricing the bonds at par with a chunky 3.5%
Western banks were at the top of that list, desperate for capital to coupon and a low conversion premium of 15%, equivalent to
plug leaking balance sheets. And many of them had lucrative assets in Rs1,980.2. Meanwhile, the shares were priced at Rs1,659.4 each,
the form of stakes in China’s top banks. or the maximum 1.1% discount to the previous day’s close. Overall
As a result, at the very end of 2008 and the beginning of 2009 banks it was equivalent to 1.9% of L&T’s outstanding share capital.
began to conduct major sell-downs of these positions. The combined deal was one of the largest fund-raising exercises
The first was a sale by UBS of a stake in Bank of China for US$810 conducted in India during the year. Investors had to buy twice the
million on December 31. Bank of America then followed a few days amount of equity for each convertible bond.
later with a US$2.84 billion sale of shares in China Construction Bank. Citi also offered support for investors to sell either convertible
Both sales were rapidly executed and offered discounts of around bonds or shares if they so wished. The deal was a success for L&T.
12% apiece to previously traded stock prices. Its shares only fell 2.3% from the four days leading to the transac-
Royal Bank of Scotland then followed later in January, offering a tion up until the day afterwards.
7.5% discount on its sale of a 4.3% stake in Bank of China. The final result impressed onlookers. In fact, Tata Motors liked it
While the banks deserve some credit for doing these deals in com- so much that it hired Citi, along with Credit Suisse and J.P. Morgan,
pressed time frames, they deliberately left sizeable amounts of money the following day to conduct a similar US$375 million convertible
on the table. and US$375 million global depositary receipt offering.
When it came to Allianz and American Express’ desire to sell some
of their stakes in ICBC in April, Goldman Sachs adopted a different
approach. BESTSOVEREIGNBOND
The US investment bank decided to approach around 10 investors RepublicofthePhilippinesUS$1.5billion8.375%bondsdue2019
for much larger positions in a private placement instead of conducting Bookrunners:CreditSuisse;DeutscheBank;HSBC
a public offer.
The change in strategy, combined with stronger market conditions,
ensured that the sale was a major success. It allowed the stock sellers to Hard as it may now be to recall, in the beginning of 2009 the
conduct their sale at a mere 4% discount to the previously traded price. world’s international bond market was in full panic mode.
38 DEC2009/JAN2010 ASIAMONEY
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