As we noted in our write-up of the 2009 Deal of the Year award, it had been a long time since a Southeast Asian initial public offering stood out to the extent that it was able to compete with the top new listings out of China. But the listing of Malaysian mobile operator Maxis Berhad did.
In that sense, our decision to hand this deal our top award last year wasn't so much a conscious effort to shift the attention away from China and back towards the Southeast Asian tiger economies of the 1990s, as a recognition of a deal well done. Although, some observers, including Credit Suisse's Helman Sitohang in his view point piece on our website yesterday, argue that the economic and financial outlook for Southeast Asia is brighter than ever as evidenced by their relative resilience during the recent global financial crisis. And they may well be right.
It is probably also true that while we felt that the spin-off and listing of Maxis in November last year would have been worthy of an award whatever country the company happened to be based in, the fact that the deal was carried out in Malaysia did add to the challenges and therefore also the final accomplishment -- both by the company and the bookrunners.
At $3.3 billion, it was the largest equity offering in Malaysia ever, the largest IPO in Southeast Asia, the largest telecom IPO in Asia since 2000 and the largest IPO in the sector globally since 2004. It also wouldn't have been easy to get international investors to put their money in Malaysia while the world was still recovering from the worst financial crisis in 80 years. Once the deal was successfully completed, analysts argued that it had the potential to raise the international profile of the entire Malaysian market.
That said, the offering had plenty of non-country related attributes that impressed us as well, not least the fact that it was skilfully marketed to stand its ground and attract sufficient investor attention against a large backlog of other IPOs. The bookrunners also had to convince investors to buy into a pure domestic telecom operator in a mature market, while the group's high-growth businesses in India and Indonesia continued to reside with unlisted Maxis Communications, which it did by positioning the stock as a yield play with significant exposure to key indices. It achieved a sizeable premium versus regional comps, but still traded up in the secondary market.
At the margin, we also felt that the deal was interesting because it was part of a privatisation-restructuring-relisting trend that had been evident on a small scale in Asia in recent years. Another example of that trend is Hutchison Telecommunications International, which was privatised and delisted by parent company Hutchison Whampoa earlier this month. Before the privatisation offer, HTIL spun off its Hong Kong and Macau business through a 100% share distribution to its shareholders and then listed it on the Hong Kong stock exchange through an introduction. The parts of that transaction happened in a different order, but the outcome was largely the same -- the cash-generating part of the old business becomes listed, while the capital-needy high-growth portion is returned to the parent company who can continue to spend the cash required to push the business forward, without worrying about paying dividends to other shareholders.
In the case of Maxis, it was initially listed in a previous reincarnation as Maxis Communications (MCB), which included the mature domestic mobile business as well as emerging overseas businesses primarily in India and Indonesia. The latter were viewed as more exciting growth opportunities, but were also a constant drain on the company's cash flow. MCB was privatised by its controlling shareholder, Ananda Krishan-controlled Binariang, in 2007 and when it returned to the stockmarket last year, the international business had been stripped out.
It is now a purely domestic mobile operator -- the largest in Malaysia -- which is committed to paying 75% of its annual earnings as dividends. And that is not a bad play in an uncertain and rather volatile market like the one we are in now. While the share price has come off its highs of M$5.53 in March and is now trading just 4.4% above the M$5 IPO price, the stock has outperformed the 0.4% gain in the benchmark Kuala Lumpur index over the same period.
The IPO, which was also awarded as Best Equity Deal and Best Malaysia Deal, was arranged by CIMB, Credit Suisse, Goldman Sachs, J.P. Morgan, Nomura and UBS.
If you are interested in re-reading some of the coverage at the time, you can take a look at:
- Maxis prepares to relist in Malaysia's largest IPO ever
- Maxis's record-size IPO sees heavy cornerstone participation
- Maxis raises $3.3 billion from record Malaysian IPO
- Saudi Telecom partners with recently privatised Maxis