Catcher Technology, a Taiwanese manufacturer of aluminium and magnesium die-casting products for computers and mobile phones, has raised $220 million from the sale of its first ever global depositary receipts (GDRs).
The deal, which was launched about 5pm Hong Kong time on Wednesday and priced later that night, was upsized by about 5% to facilitate the allocation to a few US funds whose orders came in quite late. However, the company wasn’t too keen to sell more shares unless the price moved up as well, and since the deal priced at the bottom of the indicated range, most of the upsize option was left unused.
To think that the deal would price above the bottom was a bit optimistic, though, since it came on the back of a 6.4% jump in the share price earlier that day, and was offered at a discount of just 2% to 5%. The share price has also gained 14.7% in the past five trading days and is up more than 160% in the past eight months. Wednesday’s close represented a more than three-and-a-half-year high.
The discount range translated into a price between $32.84 and $33.89 per GDR. It was fixed at $32.84, which equalled NT$189 for the company’s common shares that trade in Taipei and a 5% discount versus Wednesday’s closing price of NT$199. Each GDR equals five common shares and the final deal size accounted for 4.7% of the fully diluted share capital.
The deal, which was arranged by Goldman Sachs on a sole basis, was launched at an initial size of 6.4 million GDRs with an option to sell an additional 1.2 million GDRs. After exercising a small portion of that option, it ended up selling 6.7 million GDRs, which were all backed by new shares. According to the term sheet, the proceeds will be used for investments in subsidiaries.
The company has had an outstanding filing with the Taiwan regulators to do a deal for a couple of years, but according to a source, the GDR issue was launched on the back of reverse inquiries from a handful of investors that included sector specialists as well as hedge funds.
As a result, the deal was a little more than half covered at launch, although all the orders generated from the reverse inquiries didn’t get allocated in full. In the end about 70 investors participated in the transaction and there was enough demand that the entire upsize option could have been exercised. Surprisingly, given the tight discount in relation to the recent share price movements, about half of the demand came from hedge funds. However, about 60% to 70% of the deal was said to have been allocated to long only accounts.
One reason why hedge funds would have been comfortable to buy is that the stock trades about $75 million per day, and hence the deal accounted for only three days worth of trading volume. Another is the fact that Catcher supplies casings to Apple’s iPhones, iPads and iMacs, which is obviously a hot business. According to the company’s website, its clients also include many other big brand names in the PC and consumer electronic industries, such as Compaq, Dell, LG and Samsung.
Of the 26 analysts who cover the stock according to Bloomberg, 24 have a “buy” recommendation on it.
Catcher’s share price did take a hit yesterday, however, when it lost 6% to NT$187. This left it 1% below the deal price, but with the benchmark Taiwan index falling 0.8% as well, that was perhaps not too bad.