Alibaba’s movie unit stars in $1.56b deal

Between 30 to 40 investors participated in the share-sale of Alibaba Pictures, which plans to use the proceeds to acquire entertainment firms in China.

Alibaba Pictures Group became the latest mainland company to secure funds through a private placement in Hong Kong, raising HK$12.1 billion ($1.56 billion).  

The share-sale in Alibaba Pictures, the flagship unit of Alibaba’s entertainment arm, came amidst a 1.9% drop in Hong Kong’s stock markets on Thursday morning.

On offer were some 4.2 billion new shares at HK$2.90 per unit, according to a company statement.

At HK$2.90 per unit, the shares were offered at a 19.9% discount to the June 1 closing price of HK$3.62 per share, and a 12.9% discount to the average closing price of HK$3.33 per share for the past five consecutive trading days, read a filing on the Hong Kong Stock Exchange website.

The new shares on offer represented about 20% of the company’s issued share capital. The company will use the cash for future acquisitions of media-related companies, although Alibaba’s film production arm said it had not yet identified any specific acquisition targets.

Credit Suisse and Morgan Stanley were joint placing agents on the deal.

The issuer and syndicate have been busy sounding out potential investors over the past few days. The final book was extremely concentrated with only 30 to 40 investors participating in the $1.56 billion deal, one source close to the transaction told FinanceAsia.

As such, each investor allocation was substantial — the source noted that an evenly divided deal would mean an average ticket-size of $40 million each. “It was a very, very concentrated book,” the source said. “This isn’t your typical 100-150 lines.”

The majority of the deal was taken up by the top 20 investors, a mix of ultra-high-net-worth individuals, long-only institutional investors, hedge funds and Chinese corporates. Geographically, the majoirty of the investors were Asian, although there was also some global hedge funds in the deal, the source said.

Shares in Alibaba Pictures have surged 145.3% so far this year up to June 1.

The company was formed when Alibaba bought 60% of Hong Kong-listed ChinaVision Media for $800 million in March 2014.  

Its shares were suspended last year for five months after Alibaba said in an August 14, 2014 filing it was investing accounting irregularities.  

The investigation came one month before Alibaba’s $25 billion initial public offering in September, still the largest on record.

Private placement boom
The entertainment unit of Jack Ma’s e-commerce giant became the latest company seeking to take advantage of surging stock markets in Hong Kong and raise capital via a private placement.

China Taiping Insurance raised $1.7 billion in a secondary deal on May 5, a deal that drew investors including Yunfeng Capital, the private equity firm that counts Jack Ma’s family office and Tencent CEO Ma Huateng as investors, as well as Fosun International.

Other deals include China Galaxy Securities’s $3.1 billion private placement deal in April, and Haitong Securities’ $3.9 billion share placement in December.

Companies are issuing new shares at a break-neck pace. Hong Kong-listed issuers raised $4.51 billion via follow-on offerings in April, and $17.2 billion in May, according to Dealogic data.

Still, it’s been a volatile few weeks in Hong Kong and China. After hitting new seven-year highs on April 27, the Hang Seng Index has retreated 4.3%. Shanghai’s Stock Exchange Composite Index has fallen 2.4% in the same time frame.

Rather than valuations, local markets are being driven by Chinese retail investors and policy easing, as evidenced by the sharp-drops experienced on June 1. After the open this morning, the Hang Seng Index fell 1.9% by mid-morning. It closed down 0.34%.

Chinese investors continue to flood into Hong Kong to scoop up H-shares which are trading at a discount to A-share listed-counterparts. A-shares are trading at a roughly 30% premium to H-shares.

 

 

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