CVC and RBS exit Samsonite through final sell-down

The reverse inquiry-driven club-style deal is priced at a 3.5% discount and comes after the stock hit a new record high on Friday.

Less than two years after they took the company public, CVC Capital Partners and Royal Bank of Scotland have sold their remaining stake in Samsonite International, the world’s largest luggage maker, raising HK$4.1 billion ($528 million).

The sale was done through a club-style deal on Sunday and came after Samsonite’s share price jumped 13.7% on the back of a strong earnings report last week to reach a new record close on Friday. The deal was priced at a 3.5% discount to that close.

CVC and RBS have been expected to sell the rest of their holdings and a source said yesterday that Goldman Sachs had received lots of reverse inquiries following their most recent sale in mid-January. Hence it had a good idea of who wanted the stock and at roughly what level and after the earnings came out last Tuesday Goldman went back to the vendors proposing another deal.

Once they agreed to sell, Goldman approached a small number of these investors on Sunday morning offering a clean-up trade at a discount of about 3% to 3.5% versus Friday’s close of HK$19.98. Because the lock-up from the previous sale wasn’t due to expire until April 14, the bank also went back to the investors who participated in the January deal. Some of them chose to come into this transaction as well and all of them were okay for the lock-up to be released early.

“Everybody was keen to see a clean-up trade,” the source said.

In addition to this latest transaction, Goldman Sachs has handled two of the three previous sell-downs by CVC and RBS since the IPO. The first deal, in April 2012, was arranged by Bank of America Merrill Lynch.

All three of the Goldman-led deals have been sold to a small group of investors through club-style deals done over a weekend.

This final one was the biggest of the lot and the fact that the two vendors chose to sell their entire remaining stake in one go appeared to be welcome by the rest of the market. For one it prevents the final portion of the shares from creating an overhang on the stock. Although to be fair, that hasn’t really been the case after the past couple of trades as the share price has continued to move higher. And since the latest lock-up was still in place, investors likely didn’t think that the next sale would come just yet.

The deal comprised 212.4 million shares, which accounted for 15.1% of Samsonite’s outstanding share capital and about 50 days of trading (not counting last week when the volume did pick up quite significantly). CVC sold about 65% of the shares and RBS the rest.

The discount was kept at the wide end of the indicated range, at 3.5%, which translated into an absolute price of HK$19.28.

Most of the buyers were said to have been global mutual fund-type investors, which had been the main source of the reverse inquiries. However, some hedge funds also came into the deal.

As of Friday, Samsonite’s share price had gained 17.3% since just before the January sell-down and it was up close to 38% since the IPO. The stock fell 1.8% yesterday after the deal to finish the session at HK$19.62.

Samsonite reported a 13.2% increase in revenues in 2012 to a record $1.77 billion and 60.8% growth in net profit to $166.6 million. The result was viewed as particularly strong in light of the tough economic environment in Europe, India and China during the year and analysts said it proved the resilience of Samsonite’s business model.

Asia remained the biggest region in terms of net sales, with about 39%, but North America showed the greatest growth with 28.8% and overtook Europe as the second largest region.

Barclays analysts Phoebe Tse and Vineet Sharma raised their 12-month target price for the stock by 16% to HK$20.80 following the earnings release due to their “increased confidence in Samsonite transforming itself into a multi-brand global luggage player.” They also noted that additional acquisitions or an uptick in macro sentiment could bring upside both to their revenue and Ebitda assumptions [they project a compound annual growth rate (CAGR) of 17% in earnings from 2012 to 2014] due to operational leverage.

CVC bought Samsonite in July 2007 for $1.7 billion. RBS provided financing for the deal and when Samsonite had financial difficulties in 2009 the UK bank ended up swapping some of its debt into a minority equity stake. The two firms sold about 40% of their respective holdings in Samsonite’s $1.25 billion IPO in 2011, which was priced at HK$14.50 per share.

They have then teamed up for three additional sell-downs. The first one was done through a traditional overnight block trade in April 2012. That deal, which as noted was arranged by Bank of America Merrill Lynch, amounted to $216 million and was sold at HK$14.90 per share, a 4.7% discount to the market price.

The two other Goldman-led deals in September last year and January this year raised $287 million and $289 million respectively. The selling price in September was HK$14.50, which represented a 3.3% discount to the latest close, while in January the price was fixed at HK$16.20 for a 4.9% discount.

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