CapitaLand rights issue oversubscribed

Temasek takes up its 39.7% entitlement, but CapitaLand completes the deal without calling on underwriters. Meanwhile, Shinhan sets the price for its rights issue at a 25% discount.

Singapore real estate developer CapitaLand said on Friday that its S$1.84 billion ($1.2 billion) rights issue has been oversubscribed based on initial calculations, making it the second Singapore-listed company this year to successfully replenish its equity capital without having to rely on underwriters for support.

The news shows that minority shareholders are willing to increase their exposure at a decent discount to the market price and should be encouraging for other companies that are either already raising money through a rights issue or about to launch do so. Companies from Singapore, Indonesia, Malaysia, Korea and Hong Kong are currently in the market with deals ranging from $300 million (Indonesia's Bank Danamon) to $17.7 billion (HSBC).

CapitaLand's share price stayed well above the rights offer price of S$1.30 throughout the offering period, but did dip below the theoretical ex-rights price of S$2.01, reaching a low of S$1.79 on March 9. When the subscription period ended on March 12, the share price had recovered to S$1.96.

When the rights issue was first announced on February 9, the company's shares were trading at A$2.36, which meant the offer price implied a 45% discount to the market price -- a discount that narrowed to 34% during the subscription period.

CapitaLand provided no further details about the size of the oversubscription, but said the amount included both acceptances to the base offer and applications for excess shares on top of the pro-rata entitlements. The company is expected to make a more detailed announcement early this week.

The real estate developer offered shareholders the option of buying one new share for every two existing ones at a 35% discount to the theoretical ex-rights price of S$2.01 and a 54% discount to the post-rights issue net tangible asset value of S$2.80. Temasek, which is the largest shareholder in CapitaLand with a 39.7% stake, had committed to buy its pro-rata shares, while the rest of the deal was underwritten by the three bookrunners, namely DBS, J.P. Morgan and Merrill Lynch.

According to group CEO and president, Liew Mun Leong, CapitaLand is raising money to strengthen its balance sheet and thereby enhance its financial flexibility, making it well-positioned for any mergers and acquisitions opportunities that might arise. The group's core businesses span residential developments, retail malls, commercial, serviced residences, integrated developments and real estate financial services.

CapitaMall Trust (CMT), which is 29.7% owned by CapitaLand is also currently in the market with a rights offering, which will close on March 25. The real estate investment trust is offering investors nine new units for every 10 existing units at a price of S$0.82 apiece. This will allow it to raise S$1.23 billion ($798 million). At the time of the announcement on February 9, the offer price represented a 43.4% discount to the latest market price of S$1.45, and a discount of approximately 28.7% to the theoretical ex-rights price of S$1.15 per unit.

Most investors tend to subscribe on the final day of a rights offering since they have to fund their purchase at the time they hand in their subscriptions, and it is thus still a bit early to get a sense for how that deal is going. However, CapitaLand is taking up its full entitlement and is also underwriting a further portion up to a combined total of 60% of the issue. The remaining 40% is underwritten by joint bookrunners DBS and J.P. Morgan, meaning CapitaMall too can be certain that it will raise all the money it needs.

Separately, Shinhan Financial Group fixed the price of its rights issue at W16,800 per share on Friday. The price, which is computed according to a set formula, equals a 25% discount to Friday's closing price. This means that the deal will raise a total of W1.3 trillion ($880 million). Subscription will start on Wednesday, and the final take-up will be determined by Thursday night.

Shinhan's share price has fallen 15% from W26,450 when the rights issue was first announced on February 2 to Friday's close of W22,400, meaning the company will raise less money than if the price had been set straight away.

BNP Paribas, which is Shinhan's largest shareholder with 8.73%, has said that it will buy the rights shares that it is entitled to. BNP Paribas is also arranging the rights issue together with J.P. Morgan and UBS.

When the Korean financial company announced the deal in early February, it referred to it as a pre-emptive fundraising and said it already satisfied all the regulatory demands relating to capital adequacy ratios. Shinhan is the first Korean bank to raise equity capital this year.

¬ Haymarket Media Limited. All rights reserved.
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