Bank Danamon shareholder sells $60 million of stock

An unidentified institutional investor last night took advantage of the sharp spike in Bank Danamon Indonesia's share price to trim its stake in the bank, raising Rp619.4 billion ($60 million). The sell-down, which accounted for about 1.95% of the company, comes just one month after the bank completed a $362 million rights issue that was extremely well received by existing investors.

Given the size of the institutional investor's stake, it is likely that it has been a shareholder for some time and consequently is also highly likely to have participated in the rights offering, which was done at a price of Rp1,200. Anyone who bought shares at that price has more than tripled its investment already, which would make a sell-down extremely tempting.

Like other Indonesian banks, Danamon has had a strong run-up over the past couple of months as interest rates have been coming down, improving their margins and supporting further loan growth. On top of that, Danamon's rights issue also helped strengthen the bank's liquidity position and capital ratios, which in turn enhanced its lending capacity to microfinance and small- and medium-sized enterprises, which are its key focus areas.

Since it announced the rights issue on February 19, the bank's share price has rallied 84% from Rp2,250 to yesterday's close of Rp4,150, including a 25% gain over the past couple of sessions. The stock is now trading on par with where it was before it took a big plunge in mid-September last year.

The seller offered 163 million shares at a price between Rp3,800 and Rp3,950, which translated into a discount of 4.8% to 8.4% versus yesterday's closing price. According to a source, the deal was well oversubscribed even though the order book was only open for about 50 minutes (possible since the deal was not open to onshore US investors), but in light of the sharp gains over the past two sessions, it would have come as no surprise that the offering was still priced at the bottom of the price range for an 8.4% discount.

The larger orders, in particular, came in at the low end, which would have directed the final pricing. The buyers comprised a number of high-quality names and the usual mix of long-only and hedge funds.

Morgan Stanley acted as the sole bookrunner for the offering, which accounted for about eight trading days' worth of volume, based on the daily average over the past three months.

Danamon, which ranks as the country's fifth largest commercial bank, announced on April 20 that its rights offering had drawn total demand corresponding to more than 110% of the offer size and that, excluding applications for excess shares, the take-up rate among existing shareholders and investors who bought the rights in the market was 99.9%. That makes it the most successful rights offering in Asia so far this year in terms of the subscription rate.

Last night's transaction continues the theme of sell-downs that has been gaining pace in Asia since the turnaround in the region's stock markets in mid-March. Lately, however, the capital markets activity has become a bit more diverse with primary share placements now featuring more regularly and more companies stepping up their preparations to launch initial public offerings. The geographic spread is also greater with companies and investors in India -- and now Indonesia -- getting more active on the fundraising front. These are encouraging signs that company managements may be getting more confident about their operating environments and are starting to put more capital to work to grow their businesses again. Although, the recent recovery in share prices is obviously also helping.

Also in the market last night was a combined top-up placement and sell-down in Geely Automobile Holdings, which was offered at a similar discount to the Danamon placement. According to the term sheet, the Chinese carmaker was looking to sell 570 million new shares and its chairman Li Shu Fu was offering an additional 230 million existing shares for a total deal size of 800 million shares.

The combined offering could raise as much as HK$1.1 billion ($142 million) if priced at the top end of the HK$1.33 to HK$1.38 price range. The price translates into a discount of 4.8% to 8.3% versus yesterday's close of HK$1.45. Geely's share price gained 4.3% yesterday to a new 52-week high and is up about 60% from where it traded this time last year.

The proceeds from the new share sale will be used to fund the acquisition of Drivetrain Systems International which was agreed in March after the Australian car parts manufacturer filed for bankruptcy. The remainder of the money will go towards general corporate use and other M&A activity -- among the possibilities is a potential acquisition of Swedish carmaker Saab, with a Swedish paper yesterday naming Geely as one of the final three bidders for the General Motors-owned brand. However, a couple of weeks ago, Geely denied in a statement to the Hong Kong stock exchange that it was interested in buying either Saab or fellow Swedish brand Volvo, which is currently owned by Ford.

J.P. Morgan and Macquarie acted as joint bookrunners for the placement, which sources say was highly contested with as many as eight banks fighting for the mandate.