Great Eagle director sells his private stake for $192 million

Arrangers DBS Asia Capital double the size of the initial offer as investors covet a special dividend.
A member of the family that controls Hong Kong property investor and developer Great Eagle Holdings has sold his entire 9.2% stake in the company to raise money to refinance some of his other investments.

The HK$1.49 billion ($192 million) sale, which took place on Friday as the share price traded close to a record high, risked upsetting investors who might think that the Lo family is selling because the share price has reached its peak. The same accusations were levelled at the company four months ago when it spun-off its office developments in the Champion Real Estate Investment Trust. That stock has so far been less than successful, currently trading 24% below the IPO price.

Many property investors also have Sun Hung Kai PropertiesÆ $1.01 billion placement of new shares in fresh memory. The Citigroup-led sale, which was the developerÆs first placement in 10 years, was done at a 4.95% discount to a record high close of HK$92.20 on the very eve of the global stock market correction in May. More than four months on, the stock is trading at HK$85.05.

However, the fixed-price Great Eagle deal met with a strong response in the market which allowed sole bookrunner DBS Asia Capital to not only exercise the upsize option in full, but to increase the bought deal by another 45% - almost doubling the size of the initial offer. And even at the larger size, the deal was still about three times covered, according to one source.

Initially, deputy managing director Lo Kai Shui planned to sell 29 million shares (about half of his remaining stake) at HK$27 apiece to raise about $100 million. But when that entire $132 million stake sold in less than one hour, Lo directed DBS to sell his remaining 9 million shares as well.

The final deal size ended up being about 55 million shares. The shares were sold at a 4.9% discount to FridayÆs closing price of HK$28.40, which is only 7.5% off the all-time high of HK$30.70 that was reached in April this year.

One of the key reasons for buying the shares at this high a price was the special dividend of HK$5 per share that the company will pay in late October in addition to a normal interim dividend of HK$0.05. The money for the special dividend comes from the proceeds generated when the company sold its stake in Citibank Plaza to Champion Reit.

Great EagleÆs share price has rallied 10.5% from HK$25.70 since the special divided was announced on September 20, which means investors in the market are already partly paying to receive the cash. With a 4.9% discount offered through the placement, however, the proposition looks more rewarding.

In addition, Great Eagle is a fairly illiquid stock that on average trades only 1.2 million shares per day so investors who like the company were happy for the opportunity to buy in size.

According to one source, the buyers comprised of a mix of existing and new investors and included good quality long-only accounts.

Lo Kai ShuiÆs divestment of his private stake in the company will have no impact on the control of the company as the Lo family, including Lo Kai Shui himself, still holds a majority stake through a trust fund.

The upsized placement, which paid a 0.25% commission according to a term sheet, marked another successful capital markets execution for DBS Asia Capital which is on a roll having arranged Hong Kong IPOs for three mid-caps in the past six weeks. Two of those û sportswear manufacturer Win Hanverky and supermarket operator Beijing Jingkelong û have traded up significantly since their debuts and are now quoted 52% and 20% above their respective IPO prices.

The third one, a $154 million primary share sale for SPG Land, was priced in the upper half of is indicative range over the weekend and will start trading on October 10.

The bank also acted as joint financial adviser on Huabao International HoldingsÆ $515 million reverse takeover of the tobacco flavouring business owned by its controlling shareholder in June and was joint lead manager on the subsequent placement of $196 million worth of Huabao shares.

¬ Haymarket Media Limited. All rights reserved.
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