CLSA completed a 40 million share placement in Grande Holdings after Tuesday's close, raising $72.8 million net of the lead's 2% fee. The transaction represented a sell-down by majority shareholder Christopher Ho, who reduced his stake from 70.5% to 65.6% on completion of the deal.
A total of 60 million shares were issued by the company, but 20 million were purchased by Ho to avoid dilution, with the remaining 40 million placed with a total of 25 investors, the majority of whom are based in Hong Kong. Pricing was completed at HK$9.6 per share, equating to a 9.8% discount to the stock's HK$10.65 close.
Grande is a relatively under-researched company, but has risen from nearly HK$7.5 at the beginning of the year, massively outperforming the Hong Kong market. According to CLSA estimates the deal has at least 25% of upside.
In its research, it said that, "If we take a more aggressive approach to valuing Grande's branded distribution business by using the appraised value determined by PricewaterhouseCoopers, Grande's fair value would be HK$14.60, (42% upside), assuming a 40% discount to the appraised value."
The company has a current market capitalization around the $526 million mark and annual revenues of $1 billion. It was founded in 1990 when Ho, alongside Macau tycoon Stanley Ho acquired distressed hard disk drive make Lafe. Today, the company manufactures magnetic storage devices and consumer electronics audio and video products. It also manages the worldwide distribution and licensing of trademarks Akai, Sansui, Nakamichi and Kawa.