CVC and RBS sell another $287 million of Samsonite shares

The reverse-inquiry club deal cuts their combined stake in the luggage specialist to about 20%, while a block trade in Indonesia’s Harum Energy is pulled due to lack of demand.

Five months after their previous sell-down, private equity firm CVC Capital Partners and Royal Bank of Scotland have offloaded another batch of shares in Samsonite International, the world’s biggest travel luggage company, raising a combined HK$2.23 billion ($287 million).

The deal was done at a fixed price on the back of a reverse inquiry and allocated to a small group of high-quality investors, a source said yesterday. The marketing was also targeted to a select group of accounts, which allowed the bookbuilding to take place over the weekend and the discount to be kept at a tight 3.3%. The deal was completed before the market opened yesterday.

The latest share sale followed a global stock market rally last week, which saw the Hang Seng Index add 4.1%, including a 2.9% gain on Friday. The index extended the gains by another 0.1% yesterday, bringing its rise since late July to more than 9%. Investor sentiment was boosted last week after Germany’s top court approved the eurozone bailout fund and the Federal Reserve unveiled a new set of stimulus plans.

However, while those combined events sparked a lot of optimism in the market and prompted a significant amount of short-covering, market participants noted that the amount of outright buying doesn’t suggest that we have re-entered a bull market where investors will buy anything. This was highlighted by a block trade in Indonesian coal producer Harum Energy that was pulled yesterday morning after failing to attract enough demand.

The deal, which amounted to about $128 million at the mid-point, launched at after 8.30pm Hong Kong time on Friday, which proved too late for many investors — particularly at the end of a week when many of them had attended the CLSA Forum in Hong Kong and were busy catching up with fellow conference participants over dinner or drinks before going their separate ways again. It didn’t help that the deal hit the market without any prior wall-crossing activity and no anchor demand to help create momentum. The books were reopened for a couple of hours yesterday morning and, according to a source, there could potentially have been a deal at a slightly smaller size and a wider discount, but the vendor wasn’t interested in that and hence decided not to proceed.

CVC and RBS were clearly also focused on price as the deal came only after Samsonite’s share price once again edged above the IPO price of HK$14.50. The share price held up well after the previous sale on April 10, which was done at HK$14.90, and hit a high of HK$16.14 on May 3 — apparently investors were pleased that CVC and RBS had teamed up to sell rather than having one of them go first and create a short-term overhang on the stock. However, as we got closer to July 10, when their three-month lock-up was due to expire, the pressure on the share price increased and on July 12 it hit a six-month low of HK$11.54.

Last Thursday was the first time that the stock closed above the IPO price since the lock-up expired. It finished at HK$15 on Friday, but because the deal was sold on a private basis to just a small number of investors, the bookrunners managed to keep the discount tight enough that the two sellers were still able to divest the shares at a price on par with what they achieved in last year’s IPO.

CVC and RBS sold a combined 153.6 million shares at a fixed price of HK$14.50 each, which, as noted, represented a 3.3% discount to Friday’s close.

The deal accounted for about 10% of the company. About 65% of the shares were sold by CVC, while the remaining 35% came from RBS. The two firms still own about 20% of the company, which at the current share price is valued at about $600 million, the source said. Their remaining shares will be locked up for six months. According to the Hong Kong Stock exchange website, Samsonite has a market capitalisation of HK$21.1 billion ($2.7 billion).

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. Both firms sold about 40% of their holdings in last year’s $1.25 billion IPO.

In April this year, CVC and RBS teamed up to sell 18% of their remaining stake, or 8% of the company, raising $216 million. That deal was priced at HK$14.90, which represented a 4.7% discount to the latest close. Investors had been expecting a trade from either or both of the two sellers since mid-December when the IPO lock-up expired. Samsonite was listed in Hong Kong on June 16 last year.

Samsonite’s share price dipped below the IPO price immediately after the listing. But after initial volatile movements — it hit a low of about HK$9 in late November — it edged gradually upward until the April transaction. Yesterday the share price fell 0.5% to HK$14.92, leaving it about 2.9% above the placement price.

In late August, Samsonite announced that it booked $90.1 million in profit in the first half of 2012, a jump from $24.8 million in the same period last year, primarily due to the absence of non-recurring costs and charges associated with its IPO in June 2011.

Goldman Sachs was the sole bookrunner for the latest transaction.

Harum Energy
Meanwhile, Karunia Bara Perkasa was aiming to sell a 7.4% stake in Harum Energy in the form of 200 million shares. They were offered at a price between Rp6,000 and Rp6,100, which represented a discount of 3.9% to 5.5% versus Friday’s close of Rp6,350.

Karunia Bara Perkasa is the controlling shareholder of the company with a 70.3% stake. According to a source, the bookrunners advised against launching a deal on Friday night, but the vendor was clearly inspired by the positive moves in the stock market last week and decided to go ahead. And since the bookrunners (Credit Suisse and Goldman Sachs) were doing the deal on a best efforts basis, they had nothing to lose economically by putting the deal out there to see if anyone was interested. However, one can argue that a pulled deal, whatever the reason, is not exactly a boost to the firm’s reputation.

Aside from the late hour, the timing was also a little bit peculiar given that Harum Energy’s share price was trading 28% below this year’s high of Rp8,800 that it hit in mid-February. It has however been on an upward trend since hitting a low of Rp5,250 in mid-June.

While the demand wasn’t sufficient to price the deal within the indicated range, the source said that the order book ended up being okay. And given that the share price gained 0.8% yesterday some of the investors that submitted orders may have decided to pick up shares in the open market instead.

¬ Haymarket Media Limited. All rights reserved.
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