France-based construction materials producer Lafarge has sold an 11.2% stake in its Malaysian subsidiary, Lafarge Malayan Cement, as part of a wider divestment programme this year. The deal, which was completed through a block trade after the market closed yesterday, was flagged as a possibility earlier this month and was preceded by a roadshow.
Lafarge offered 95.2 million shares at a price between M$6.18 and M$6.37 apiece, which represented a discount between 1.7% and 4.6% versus yesterday's close of M$6.48. The final price was fixed below the mid-point at M$6.24 for a discount of 3.7% and a total deal size of M$594 million ($185 million).
A source said there was good demand from long-only international investors, complemented by a few well-known Malaysian accounts. Investors were excited about the transaction partly as a liquidity event, which helped to keep the discount tight. The stock is normally thinly traded -- this deal accounted for 140 trading days worth of volume based on the daily average in the past three months -- and the opportunity to pick up shares in size was welcome.
Lafarge Malayan Cement is the leading cement producer in Malaysia and popular among investors because of its high dividends. Also supporting the offering was the fact that the parent company will still hold 51% after this sale. In a statement on July 2, when Lafarge said it had "decided to explore the potential sale of a minority interest of up to 11.2%", it added that it will remain the majority shareholder and keep management control of the company.
The deal was at least two times covered and attracted more than 25 investors, according to the source. About 95% of the demand was said to have come from long-only funds and was well diversified between Asia, Europe and the US. Aside from Malaysia, the company also visited Hong Kong, Singapore, London, Scotland and the US on the roadshow. The marketing finished in Boston yesterday.
While there was clearly some price sensitivity among the orders, the price range on offer was already at a tight discount. So far this year, there has been only one other block trade of size in the Malaysian market, a $120 million sale of a 7.7% stake in Malaysian Airports Holdings by state-owned investment holding company Khazanah in March. That deal was priced at a 4.1% discount to the latest close.
Lafarge Malayan Cement's share price is steady, having traded in a range between M$6 and M$6.85 for the past 12 months. As of yesterday's close, it was up 8% versus 12 months ago.
The company operates three integrated cement plants in Malaysia with a combined annual capacity of 13 million tonnes of cement and 8 million tonnes of clinker. It also operates one grinding plant.
Lafarge is divesting part of its assets to replenish its balance sheet following the financial crisis and after spending Eur8.8 billion to buy Egypt-based Orascom Cement in early 2008.
The block was arranged by Royal Bank of Scotland.