Hong Kong watch maker raises $162 million

Peace Mark is able to upsize its placement and sell the full number of shares, but only by offering an 11% discount.
Peace Mark Holdings, a Hong Kong company that manufactures and sells watches, raised HK$1.26 billion ($162 million) through a placement of new shares yesterday. Although it had to offer an 11% discount, the company was able to upsize the base deal of 110 million shares and sell a further 49.9 million shares.

A source close to the deal says that the company was taking advantage of a slim window of opportunity. It will be releasing results in mid-July and, since a company cannot conduct a placement in the four weeks before announcing results, it was left with the choice to either go now or later in the summer. A 3% increase in the share price in the first half of trading yesterday was timely for the issuer and the deal was launched at about 2.30pm Hong Kong time, after the stock was suspended from afternoon trading. Yesterday's share price gains, which bucked the negative trend in the broader market, was likely a key reason for the wide discount though.

The new shares were priced at HK$7.90, near the bottom of the indicated range of HK$7.81 and HK$8.26. Before the suspension yesterday the shares were selling for HK$8.88. The company's share price has been quite stable recently, but it is still well below the prices seen at the beginning of the year. In mid-January the company was trading at around HK$12 a share, before crashing to a low of HK$5.35 on March 18.

The total order amount exceeded the base deal size by 2.5 times and, including the upsize option, the deal was 1.8 times covered. The final size is equal to 12.7% of the company.

According to the source, around 75% of the investors were long-only funds, with the rest being hedge funds. Over half of the investors were from Asia, with around 35% from Europe and 10% from the US. The deal was managed by ABN AMRO and BNP Paribas.

The company is employing a two-pronged expansion strategy. In China and Hong Kong it is opening more retail outlets: it expects to open 30 shops under the Sea-gull brand over the next two years. And it is expanding regionally through acquisitions. It recently purchased Singaporean watch company Sincere. This acquisition was done with borrowed money, and the money raised from the placement will be used to pay off debt. ôThey want to make sure that their balance sheet is in good shape so that they can execute their plans,ö says the source.
¬ Haymarket Media Limited. All rights reserved.