day-1-awards-for-achievement-2008

Day 1: Awards for Achievement 2008

Today we announce the defining deals of 2008 from each country. They can be an equity offering, an M&A transaction or a bond. In some cases, we have taken the opportunity to select a transaction that did not receive one of our major deal awards, but very much deserves the recognition.
BEST CHINA DEAL
Chinalco's $14 billion stake acquisition in Rio Tinto

Advisers: China International Capital Corp, Nomura
Legal advisers: Cleary Gottlieb Steen & Hamilton, Clifford Chance, Linklaters, Mallesons Stephen Jaques, Simpson Thacher & Bartlett, Wachtell Lipton Rosen & Katz


On February 1, Aluminum Corporation of China (Chinalco) and US aluminium producer Alcoa bought 12% of the outstanding shares in UK-listed Rio Tinto for $14 billion via Singapore-based holding company Shining Prospect. Chinalco owns around 91.5% of Shining and Alcoa the balance. The move was intended to give state-owned enterprise Chinalco a negotiating position if BHP Billiton's hostile bid for Rio Tinto went through. Even those who suggest that Lehman Brothers (the deal was completed before the takeover by Nomura) was appointed adviser only because every other bulge bracket investment firm was conflicted, cannot fault the execution of the dawn raid. The fact that Rio TintoÆs shares have plummeted since the deal and that BHP has withdrawn its bid in the changed economic environment give further ammunition to critics of the deal. But even without taking into account the very healthy fee Lehman banked as soon as it concluded the share acquisition, we believe the sheer audaciousness of this deal and the fact that it made the world realise what China is capable of make it deserving of this award. And we'd be surprised if investment bankers didn't spend time this year marketing similar deals to other Chinese firms.

BEST HONG KONG DEAL
Champion ReitÆs acquisition of Langham Place and $1.6 billion acquisition financing

Adviser and bookrunner: Citi
Legal advisers: Baker & McKenzie, Johnson Stokes & Master


This deal was important to Champion Real Estate Investment Trust as it transformed it from a single-asset Reit into to a more diverse vehicle in terms of location, tenant base and income streams and almost doubled its market cap and increased its asset value by more than 50% - at the time of the deal. It was also important for Hong KongÆs stagnant Reit industry since the deal was accompanied by the unwinding of ChampionÆs interest rate swap agreements and the termination of the sponsorÆs dividend distribution waiver, which had both allowed the Reit to retain more of its income for dividend distributions and thus artificially boost its yield û a type of financial engineering that had prevented Champion and other Hong Kong Reits from making yield-accretive acquisitions. Once Champion had led the way, Prosperity Reit quickly followed suit and removed its swap agreements. The HK$12.9 billion ($1.6 billion) financing package, which included a $380 million equity placement to institutional investors; a $361 million placement to ChampionÆs sponsor, Great Eagle Holdings; a $600 million CB (of which Great Eagle bought half); and a HK$2.5 billion term loan (including re-financing of existing debt at Langham Place), was a bold move - especially by a single bookrunner û which made use of CitiÆs capabilities across asset classes. Faced with numerous comments suggesting it couldnÆt be done, Citi worked for several months to pinpoint the right timing and eventually pulled off the simultaneous execution of all parts of the package, with a few weeks to spare before the end of June deadline. While the deal has been criticised from some quarters for the fact that Great Eagle bought 50% of the equity and the CB, this same feature was generally welcomed by investors as a show of strong support by the sponsor (Great Eagle mainly kept its pre-deal stake from being diluted) and the equity, CB and loan were all well-received in the market.

BEST INDIA DEAL
EtisalatÆs $900 million stake acquisition in Swan Telecom

Adviser to Etisalat: Citi
Adviser to Swan Telecom: Deutsche Bank
Legal advisers: AZB Partners, Latham & Watkins, Wadia Ghandy


Emirates Telecommunications (Etisalat), the largest telecom operator in the United Arab Emirates, agreed to buy 45% of India's Swan Telecom for $900 million in September. Swan Telecom holds mobile licenses for 13 areas in India and is in the process of acquiring two more, giving it access to a population of 900 million potential mobile phone users across the emerging market. The balance 55% of Swan Telecom is owned by several entities, including its promoter which is controlled by the Mumbai-based Dynamix Balwas Group. The deal illustrated that even in the most difficult markets, identifying the right pockets of liquidity can create M&A deals. With respect to the Middle East specifically, companies based there are increasingly looking to Asia for expansion and growth û particularly in the telecom sector. The deal was a precursor for other strategic investments in Indian telecom majors this year and the valuation set a benchmark.

BEST INDONESIA DEAL
PT Indika EnergyÆs $329 million IPO

Bookrunners: Citi, Deutsche Bank, Danareksa, Indopremier, Mandiri Sekuritas
Legal advisers: Sidley Austin


Indika was the first of three Indonesian coal producers to go public this year, and its well-timed offering (in May) allowed it to take advantage of the final few weeks of positive sentiment for commodities and a strong run by its Indonesian peers. The deal priced at the top of the range and the greenshoe was exercised in full even though the stock was offered at a tighter discount to the comps than the recent IPO average. The story was also rather complex given that Indika is an integrated energy group with only a 46% stake in IndonesiaÆs third largest coal mine. The marketing centred on the companyÆs visible earnings profile and included comprehensive pre-deal research to generate interest among global resources investors and Asean specialists at a time when demand was getting highly selective. When the market threatened to turn on them, the leads quickly decided to price the deal two days earlier than planned, thus preventing the possibility of some investors getting cold feet. The IPO attracted $3.9 billion of demand and the 77.5% international tranche was widely placed with high-profile long-only and hedge fund accounts, allowing the shares to gain 12% in the first week and trade above the IPO price for the first six weeks.

BEST KOREA DEAL
LG Display, $1.1 billion block trade

Bookrunners: Citi, Credit Suisse
Legal advisers: Kim & Chang, Linklaters, Sullivan & Cromwell


LG Display stands out for being the largest secondary share offering in Asia this year and for pricing at a premium to the comps in a tough market. But it is also a good example of one of the key trends seen this year û that of existing shareholders taking advantage of brief windows of opportunities in an otherwise difficult market. Royal Philips Electronics sold 6.7% of LG Display in a fully-underwritten deal on the back of an overnight rally on Wall Street and a strong post-earnings share price performance, attracting 117 investors. As the second sell-down by Philips in the TFT-LCD manufacturer in just five months (reducing its stake to 13.2%) this trade didnÆt have the same attraction as a liquidity event as the first one and didnÆt remove the overhang on the stock - as will be the case with the expected third and final sell-down - and was made even more challenging by Philips insisting on selling a minimum of $1 billion worth of shares and keep the maximum discount to about 8%. The deal did price at the bottom of the price range for an 8.1% discount and despite having enough orders to cover all of it, the bookrunners chose to exercise only a small portion of the greenshoe, upsizing the transaction by 5%. This helped limit the share price decline to less than 1% below the offer price the following day û a good outcome compared with several other block trades at the time.

BEST MALAYSIA DEAL
Petronas' $2.5 billion stake acquisition in Gladstone LNG project

Adviser to Petronas: J.P. Morgan
Adviser to Santos: Citi
Legal advisers: Addisons, Freehills, Vinson & Elkins


Malaysian government-owned Petroliam Nasional Berhad (Petronas) emerged the winner in a competitive bid for a 40% stake in the Gladstone liquefied natural gas (LNG) exploration project from Santos at a price of $2.5 billion. Santos will retain the remaining 60%. Petronas is Asia's largest LNG producer while Santos is Australia's third-largest oil and gas producer. The deal diversified sources of gas reserves for Petronas and also acted as an entry point into the Australian coal-seam gas (CSG) market, making the Malaysian firm a key international player in Australia. It brought together Santos' reserves with PetronasÆ marketing abilities. PetronasÆ investment was the largest Malaysian investment into Australia to date. Petronas paid aggressively to secure the stake but, given the long-term nature of the investment, will no doubt reap the benefits.

BEST PAKISTAN DEAL
Maybank's $602 million stake acquisition in MCB

Advisers to Maybank: Aseambankers, J.P. Morgan
Adviser to MCB: Merrill Lynch
Legal advisers: Lexium Law, Shearn Delamore & Co


Malaysia's Maybank shelled out M$2.17 billion ($602 million) for a 15% stake in MCB Bank in Pakistan (previously known as Muslim Commercial Bank) in May, also negotiating an option to buy a further 5%. Maybank exercised the option in August. The price was aggressive - an 11% premium to MCB's most recently traded price and 5.1 times trailing book value. But it was broadly in the same range as the deals struck by other buyers for banks in Pakistan. What was unquestionable was the quality of the asset Maybank bought. MCB is consistently rated one of Pakistan¦s top banks, to the extent that investors buy MCB as a proxy for the countryÆs growth. MCB's net profit has grown eight-fold over the past five years. The deal with Maybank was also based on a shared vision by the two parties to grow Islamic banking and other businesses. Even critics of Maybank's aggressive acquisition-based growth strategy have endorsed the rationale for this deal.

BEST PHILIPPINES DEAL
Lopez groupÆs $278 million sale of North Luzon Expressway to Metro Pacific

Adviser to the Lopez Group: Macquarie Capital
Legal advisers: Quiason Makalintal, Sycip Salazar


The PhilippinesÆ first M&A deal in the toll road sector reflected one of this yearÆs trends: a growth in infrastructure investment. In August, local conglomerate Metro Pacific Investments paid Ps12.2 billion ($278 million) for a controlling interest in the countryÆs longest toll road, the North Luzon Expressway, from the Lopez groupÆs First Philippines Holdings and Benpres Holdings, which were advised by Macquarie Capital. Through their jointly owned subsidiary, First Philippine Holdings Infrastructure, the two Lopez companies owned a 67.1% stake in the holder of the concession rights and 46% in Tollways Management, which operates and manages the 84km road. The deal confirmed Metro Pacific as one of the biggest infrastructure investors in the Philippines û in 2006, Metro Pacific and a joint venture partner won a bid for an 84% stake in Maynilad Water Services, the water, sanitation and sewage provider for a zone of Manila.

BEST SINGAPORE DEAL
TemasekÆs sale of three power generating companies

Advisers to Temasek: Credit Suisse, Morgan Stanley
Adviser to China Huaneng Group on Tuas Power: Nomura
Adviser to Lion Power consortium on Senoko Power: Macquarie Capital
Adviser to YTL Power on PowerSeraya: Lexicon Partners
Legal advisers: Allen & Gledhill, Clifford Chance, Shook Lin & Bok, Slaughter and May


In early December Temasek announced the sale of its third and last generating company, PowerSeraya, to MalaysiaÆs YTL Power, marking the completion of the three genco sales it set out to do. The sell-side mandate was awarded in 2006 and the deal kicked off with the first genco, Tuas Power, being put on the block last year. In total Temasek realised more than S$12 billion ($7.9 billion) from the sale of the assets, which account for 90% of Singapore¦s power generation. The realisation was far in excess of analyst expectations before the first sale. The deals marked a number of firsts: the largest-ever divestment by Temasek, the largest-ever acquisition by a Chinese power company and the largest outbound investment into Singapore by a Malaysian firm. The Ebitda multiples achieved were in the double digits in all three instances and the fact that the sales were transacted in a year of market dislocation are testament to the attractiveness of the assets and the strength of Temasek, who helped secure debt financing for the buyers. The deal enriched the coffers for a number of investment banks who played a role, with the sell-side advisers leading the charge.

BEST TAIWAN DEAL
DBS BankÆs acquisition of Bowa Bank

Adviser to DBS: UBS
Sell-side adviser: Deloitte
Legal advisers: Allen & Gledhill, Baker & Mckenzie, LCS & Partners


In terms of strategic importance, DBSÆs takeover of the Bowa BankÆs ôgood assetsö does stand out in what has been a thin year for Taiwan deals, both on the equity and M&A side. The acquisition, which is DBSÆs first in Taiwan, gives the Singapore bank a platform that will allow it to capitalise on the growing trade and investment flows between Taiwan, Hong Kong and mainland China û a strategy similar to that of several other foreign banks, including Citi, HSBC and Standard Chartered, which have been expanding through their own takeovers of failed Taiwanese banks last year. Loss-making Bowa Bank was taken over by the Taiwanese government in August 2007 and after stripping out the bad loans, the bank was re-offered to the private sector through an auction in late January. As the winning bidder, DBS will get a compensation payment of NT$44.5 billion ($1.4 billion) from the government for taking over $2.8 billion in deposits and $2.0 billion in net loans at the bank. It will also get its hands on 42 branches, of which 38 can be re-located anywhere within the Greater Taipei area û a key advantage in Taiwan where existing banks arenÆt allowed to open new outlets or move their existing ones.

BEST THAILAND DEAL
Esso (Thailand)Æs $268 million IPO

Bookrunners: Morgan Stanley, Phatra Securities
Legal advisers: Allen & Overy, Baker & McKenzie, Davis Polk & Wardwell


A difficult market û the start of the roadshow coincided with J.P. MorganÆs bailout of Bear Stearns û and a negative outlook for refining margins suggested that this affiliate of Exxon MobileÆs could be a difficult one to bring to market. But a deal structure that included an extraordinary dividend payout after listing and a promise to maximise distributions going forward made the Bt8.46 billion ($268 million) deal û the first equity offering targeted at international investors out of Thailand in 10 months û appealing to both yield-focused investors and hedge funds and resulted in the international tranche being 5.4 times covered. As the international bookrunner, Morgan Stanley embarked on what it describes as a ôrelentlessö effort to educate investors about the merits of the deal, focusing among other things on positive supply/demand metrics and the potential upside from LPG price deregulation. This, together with ôcareful investor targetingö helped to build momentum in the book and to push the price above the bottom of the range û showing that deals can get done even in a difficult market. The final price was fixed at Bt10 versus a range of Bt9-13.

BEST VIETNAM DEAL
Swiss ReÆs $79 million stake acquisition in Vietnam National Reinsurance Corporation (VinaRe)

Adviser to Swiss Re: Credit Suisse
Sell-side adviser: Rothschild, Horizon Capital Advisers
Legal advisers: Skadden, Vision Law, Russin & Vecchi


Swiss ReÆs acquisition of 25% in Vietnamese reinsurance provider, Vietnam National Reinsurance Corporation (VinaRe), for Vnd1.3 trillion ($79 million) via auction was the first major strategic investment by a global player in VietnamÆs reinsurance sector. Swiss Re, a global reinsurer operating in 25 countries, had already had a business relationship with VinaRe for more a decade but with the investment that relationship expanded to include Swiss Re offering the Vietnamese company technical assistance across all of its businesses, with a focus on further enhancing its reinsurance capabilities. Aside from helping the sector, the deal solidified CreditÆs SuisseÆs position as the leading investment bank in Vietnam.
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