GT Capital IPO

GT Capital set to raise $438 million via Philippine IPO

The Ty family’s holding company fixes the price above the mid-point after the international tranche is more than five times oversubscribed.
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Metropolitan Bank and Trust (Metrobank) is part of soon-to-be-listed conglomerate GT Capital (AFP)</div>
<div style="text-align: left;"> Metropolitan Bank and Trust (Metrobank) is part of soon-to-be-listed conglomerate GT Capital (AFP)</div>

Philippine conglomerate GT Capital has fixed the price of its initial public offering in the top half of the range and is set to raise Ps18.8 billion ($438 million) ahead of its listing on April 20. The IPO is the first on the Philippine Stock Exchange this year and the biggest in more than a year.

With the upbeat domestic stock market in the background, the deal priced at Ps455 per share, after being marked in a range between Ps415 and Ps470.

The offering is made up of 41.2 million shares, of which 80% are new. The base deal accounts for 26.1% of the enlarged share capital. There is also a 15% greenshoe that could increase the total proceeds to as much as $503 million if exercised in full.

Even without the greenshoe, this is the biggest IPO in the Philippines since Cebu Air raised Ps26.5 billion ($611 million) in October 2010, according to Dealogic. In dollar terms Cebu Air was the largest Philippine listing ever, thanks to the appreciating peso, but in local currency terms it ranked behind SM Investments Corp’s Ps28.75 billion IPO in 2005.

The international portion of the deal, which closed on Monday, was more than five times oversubscribed and drew a diverse shareholder base, the majority of which were prestigious long-term institutional investors and sovereign wealth funds, the company said in a statement filed to the Philippine Stock Exchange on Tuesday.

A source said close to 100 investors participated in the transaction. The demand was led by Asian-based investors, but there was also very good interest from the US and Europe. Anchor investors took a significant portion of the international tranche.

“Despite the strong demand, we decided not to price at the top of the range, to leave investors with room for upside,” Alfred Ty, vice chairman of GT Capital, was quoted as saying in the stock exchange filing. He added that the interest in the deal “highlights the new vote of confidence in the Philippine investment story among global investors”.

Of the base deal, the international/domestic split will likely be 58.5% to 41.5%, instead of the initially planned 70% to 30%, according to the source. But as the greenshoe is allocated to the international tranche, the overall split will be different. The domestic portion of the offering will officially run from April 10 to 16, but the domestic bookrunner has already built a shadow book of domestic institutions, which is indicating strong demand – hence the decision to increase their allocation.

GT Capital’s IPO comes as the benchmark PSEi index is on a bullish run – according to the Philippine Stock Exchange it hit a record high more than 10 times in the first quarter. So far this year, the index is up more than 15% as investors are encouraged by the strength in the local economy, as well as signs of recovery in US and European markets. The gain comes on the back of a 4% rise in 2011, when the Philippines outperformed most other stock markets globally.

Foreign investors bought a net Ps19.4 billion worth of Philippine stocks in the first quarter, which compares with Ps4.9 billion of net selling in the same period last year, according to preliminary stock exchange data.

GT Capital is the holding company of the Ty family, whose businesses range from banking and real estate development to power generation, auto manufacturing and life insurance. The portfolio gives the company a diversified exposure to the growth of domestic consumption and the broader Philippine economy and makes it an attractive investment target for international funds looking for ways to play this growth. The holdings include several listed units, such as blue-chip Metropolitan Bank and Trust (MBT).

The final price values the company at a 2012 price-to-earnings (P/E) ratio of 13 times, the source said. That places it at a discount to the Philippine conglomerate sector average of around 16.5 times this year’s earnings. There are a number of listed conglomerates in the Philippines, including Ayala and SM Investments, but none of these companies has the exact same mix of assets as GT Capital.

GT Capital plans to use part of the IPO proceeds to finance several prime projects of its Federal Land property subsidiary in metro Manila and Cebu, and to buy the remaining 20% stake in Federal Land that is currently held by other Ty family holding companies. The move will make Federal Land a wholly-owned subsidiary, which is in line with the group’s plans to consolidate all non-bank investments into GT Capital.

With the proceeds, it also plans to exercise an option to buy 4.6% of independent power producer Global Business Power, and to repay existing debt.

UBS is the sole global coordinator and international bookrunner for the offering, while First Metro Investment Corp is handling the domestic portion of the deal.

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