Baring Private Equity exits Taiwan’s Airtac

The deal is almost doubled in size to $64 million following strong demand and still prices at the top end of the range.
<div style="text-align: left;">
Airtac makes pneumatic components for pressurised air and gas systems
</div>
<div style="text-align: left;"> Airtac makes pneumatic components for pressurised air and gas systems </div>

Baring Private Equity last night sold its remaining shares in Taiwan-based Airtac International Group, raising NT$1.89 billion ($64 million). It was a small trade — particularly to begin with — but it still attracted the interest of almost 30 investors, which allowed the deal size to be almost doubled from the initial plan.

The seller initially offered to sell 5.8 million shares, which accounted for 53.5% of Baring’s remaining stake, but when the level of demand became clear it decided to go ahead and sell its entire position. Notably it was able to do so while still fixing the price at the top end of the range.

The fact that the deal turned into a clean-up trade would have helped attract investors as they tend to like stocks where an existing overhang is being removed and the free-float increased. The potential upsize wasn’t flagged on the initial term sheet, but many investors seem to have anticipated that Baring would go ahead and sell all its shares if it was given the opportunity and several of them were asking during the bookbuilding whether an upsize was possible, one source said.

In fact, for small block trades in fairly illiquid stocks it has become more common to launch a smaller deal first to test the demand and then increase the size quite substantially if the interest is there. Sometimes these deals come with an upsize option, sometimes not. If the demand is strong enough it doesn’t really matter, although the latter scenario will require bankers to go back to investors to reconfirm their orders in light of the changed circumstances.

Baring also helped to fuel the interest by offering the stock at a decent discount at the wide end of the range, only to tighten it later when investors were already hooked.

The shares were offered at a price between NT$170 and NT$174, which translated into a discount of 3.9% to 6.1% versus yesterday’s close of NT$181. As noted, it was priced at the top end, at NT$174 per share, for a 3.9% discount.

Including the upsize, Baring sold approximately 10.84 million shares, which accounted for 7.2% of the company and just over 30 days of trading volume. The fact that the stock is quite illiquid meant that the deal was viewed as a liquidity event.

Sources said the deal was close to three times covered at the initial size, mainly thanks to one global long-only fund that put in an order that covered more than 80% of the base deal.

The overall demand and the allocations were skewed towards long-only investors, but in terms of number of investors, there were more hedge funds.

Aside from the attractive discount and the fact that it was a clean-up trade, investors were also happy to increase their exposure to Taiwan, which has performed better in the past couple of months as the outlook for the global economy has improved. The benchmark index is up 11.8% since mid-November and has gained 2.9% year-to-date.

Airtac has gained 32.1% in the same period, including a 4.6% jump yesterday that took the stock to a 52-week high. However, it is still well below its all-time high of NT$265.50 that it reached in May 2011.

Airtac makes pneumatic components, including flow controls, for pressurised air and gas systems that are used in a variety of industries, including auto production, machinery manufacturing, electronics, environmental protection, medical equipment and the food and packaging industries. It also offers technical support services.

The company was set up in Taiwan in 1988 but is now headquartered in Ningbo in China. It listed on the Taiwan main board in December 2010 and has a market capitalisation of about $900 million.

UBS was the sole bookrunner for the transaction.

¬ Haymarket Media Limited. All rights reserved.