Bank Central Asia (BCA), the biggest bank in Indonesia by market cap and the largest private-sector bank in terms of total assets, has raised Rp1.968 trillion ($202 million) by selling the rest of the treasury shares held on its balance sheet.
The shares were sold to a small group of investors through a club-like deal that was open for less than 45 minutes late on Tuesday evening, a source said.
This was the second sale of treasury shares by BCA, which broke new ground with the first such sale in Indonesia back in August last year. That deal raised just $74 million though.
As per Indonesian regulations, the shares were sold at a 0% discount to the latest close, which put the price at Rp9,900 per share — well above the clearing price of Rp7,700 for the August sale.
At a 0% discount, this was never going to be a sale that appealed to a wide group of investors, especially since the stock is trading at a price-to-book multiple of about five times and is currently at a record high.
However, some investors who are able to take a three- to five-year view do really like the stock and, according to the source, about 10 investors took part in the transaction.
The deal was anchored by one large order in particular that was confirmed before launch, but the order books were opened to the wider market to bring in a few other accounts. The deal didn’t launch until 10pm Hong Kong time, which suggests that it was primarily targeted to investors who had already shown an interest in the name and were aware that a deal was coming.
All the buyers were long-only funds and most of them were quite agnostic about the price, the source said. The anchor order came from a large US fund, but the final order book also included large global funds, a couple of regional funds, one Indonesian fund and one existing shareholder.
The sale of treasury shares is quite a difficult task in Indonesia since regulations dictate that the selling price cannot be below the highest of the 90-day average closing price and the latest close. In practice, this means that it is only really possible to sell the shares when the spot price is above the 90-day average, which only happens on two or three occasions per year. It also means that the company cannot offer the shares at a discount to the latest close to attract investors.
BCA demonstrated that it is still possible to sell the shares back to the market when it offloaded close to 91 million treasury shares in August last year — shares that it would otherwise have had to cancel in October. That sale was arranged by Credit Suisse and Deutsche Bank as joint bookrunners.
The feat has now been repeated on a larger scale and this time Credit Suisse acted as the sole bookrunner. The bank also hard underwrote the transaction, which meant that the end investors didn’t have to be disclosed. According to the source, the entire deal was placed with external accounts, however.
This time, the bank wasn’t running up against a deadline of the shares being cancelled as the remaining treasury shares weren’t about to expire until next autumn. But since the share price was trading above the 90-day average there was a limited window to do the trade and BCA decided to try to take advantage of that.
As of the close of trading on Wednesday, the share price had also gained 25% in the past 12 months and was up 7.6% since the beginning of this year, making it a good time for the bank to sell. The shares were accumulated in the period between January and October 2006 at an average price of Rp4,198 per share, which means BCA would have realised a gain of 136% from this latest sale.
BCA’s share price gained another 1.5% to Rp10,050 in the wake of the deal yesterday.
The bank sold 198.781 million treasury shares, which accounted for about 0.8% of the total share capital.
The money raised will be used to increase BCA’s capital adequacy ratio.