GGAM exits Bloomberry via $166m block trade

The sale, which was priced at a 10.4% discount, comes four months after the Philippine casino operator fired its GGAM-appointed COO. Separately, a group of founders raises $75 million from the sale of shares in chain restaurant operator Tsui Wah.

Las Vegas-based Global Gaming Asset Management (GGAM) has sold its entire 8.7% stake in Bloomberry Resorts Corp, the operator of the Solaire Resort & Casino in Manila, through a block trade, raising Ps7.42 billion ($166 million).

The sale, which was completed after Philippine market closed on Wednesday, comes after Bloomberry terminated the casino management agreement that it had with GGAM in September last year – just six months after the $1.2 billion Solaire Resort & Casino opened. It also fired its GGAM-appointed chief operating officer, Michael French.

In an announcement at the time, Bloomberry said that Las Vegas-based GGAM had failed to perform its obligations under the agreement and had not spent any material time attending to the management of the Solaire, which was the first casino to open in Manila’s new Entertainment City gaming hub.

GGAM has denied this and is seeking arbitration on the issue in Singapore, but as Bloomberry is showing no signs of backing down, it had been expected to sell its shareholding in its former partner, which is controlled by Philippine businessman Enrique Razon.

The seller offered approximately 921.18 million Bloomberry shares at a price between Ps8.00 and Ps8.25 apiece, which translated into a discount of 8.1% to 10.9% versus yesterday’s closing price of Ps8.98.

The discount was pretty wide, but Bloomberry isn’t a particularly liquid stock and given the recent management changes that was likely necessary to attract investors. The placement accounted for more than 200 trading days, based on the average daily trading volume in the past three months.

To further ensure the success of the transaction, the joint bookrunners had lined up number of investors before launch and when the order books opened at about 4:15pm Hong Kong time, the deal was already 80% covered.

The bookbuilding added a decent amount of demand on top of that, although most of the interest was said to be focused towards the bottom of the price range. According to one source, the quality and size of the orders fell away quite significantly when moving up the range.

In the end, the price was fixed slightly above the bottom at Ps8.05 per share, which translated into a 10.4% discount.

Close to 60 investors participated in the transaction, but the allocation was quite concentrated and the source estimated that about 70% of the deal went to the top 10 accounts.

The demand came primarily from international long-only funds, including a number of US accounts, which is not that strange given that the seller is a US firm. Some of Bloomberry’s largest existing shareholders are also US funds.

There was also some hedge fund interest, even though the stock cannot be short-sold.

The response from domestic Philippine investors was more muted and they are said to have accounted for only about 10% of the demand.

The fact that this was a clean-up trade of a stake that has been acting as an overhang on the stock for the past few months would have helped boost the interest, although the fall-out with GGAM may also have deterred some investors.

Bloomberry’s share price has lost about 25% since the termination of GGAM’s management contract four months ago, although it was already down about the same amount from its record high of Ps16.58 when that happened. The record was set around the time of the opening of the casino in March.

GGAM, which has extensive international gaming expertise as well as long standing gaming relationships with independent gaming promoters, advised Bloomberry on the design and construction of the Solaire Resort & Casino, and was retained to manage the casino after it opened in March last year.

It exercised an option to take a stake in Bloomberry in October 2012, about five months after the company widened its shareholder base through a fully-marketed $209 million follow-on that was priced at Ps7.50 per share.

Bloomberry listed through a reverse takeover towards the end of 2011.

In early October last year, the company hired Thomas Arasi as president and COO to replace French. According to a statement at the time, Arasi is a former CEO of Marina Bay Sands in Singapore and has also held senior positions within the InterContinental Hotels group.

In November it announced that its net profit reached Ps165 million in the third quarter, a seven-fold increase compared to the previous three months. Net revenues increased by 14% to Ps4.12 billion in the same period.

Cantor Fitzgerald, Credit Suisse and Deutsche Bank were joint bookrunners for the block trade.

Separately, a group of founding shareholders of Hong Kong-listed restaurant chain operator Tsui Wah Holdings, raised HK$580 million ($75 million) from a sell-down of their combined stake. The deal was priced at HK$5.00 per share, which was close to the bottom of the HK$4.99 to HK$5.10 range and represented a discount of 7.7% versus Wednesday’s close.

Tsui Wah’s share price has risen 139% since the IPO in November 2012 and it comes as no surprise that the founders are choosing to take some profit following the expiry of the initial 12-month lock-up period two months ago. Their combined stake will fall to 63.2% from 71.5% as a result of the deal.

According to a source, the demand came primarily from Hong Kong- and China-focused funds, but there was good interest from international long-only accounts as well as. Some hedge funds also participated.

Tsui Wah operates a chain of Cha Chaan Teng restaurants, which are informal, quick-service eateries similar to a diner that serve a unique Hong Kong-style cuisine that combines traditional Cantonese food with elements of both Asian and Western fare. The company has been expanding rapidly since its listing just over a year ago and currently has 35 restaurants in Hong Kong, China and Macau, which is up from 25 at the time of the IPO.

Nomura was the sole bookrunner for the transaction.

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