The asset management arm of Ping An Insurance has sold its remaining 6% stake in Hong Kong-listed Value Partners through a block trade, raising a total of HK$639.9 million ($82 million). The deal was done at a 9% discount after the market closed last Thursday.
The timing seemed a bit odd, given that the Hong Kong market was closed on Friday to celebrate the anniversary of the handover. The share price was also trading slightly below the level where it was when Ping An sold one-third of its stake at the end of April. However, the local markets had been improving during the past week and the 1.5% gain on Thursday seems to have brought Value Partners’ share price to a level Ping An was comfortable with.
But the key to the transaction was the fact that it took place on the final day of the second quarter. Many institutional investors tend to dress up their accounts with last-minute sales and purchases at the end of each quarter to maximise their returns — and this deal evidently provided an opportunity that was hard to ignore. Rather than using the day after the deal as the trade date, as is usually the case, the bookrunner used June 30, which meant that investors who bought into the deal were able to book the entire deal discount as a gain in their second-quarter reports.
According to a source, the deal was well covered and attracted more than 30 accounts. Aside from the ability to book an easy gain, investors might also have been hoping to capture a bit more of the upside as the market recovers by investing in an asset management firm. Value Partners is a Hong Kong-based fund and asset manager focusing primarily on investments in small and mid-cap companies in Greater China.
The demand was split about 50-50 between hedge funds and fundamental investors and, as indicated by the yesterday’s trading volume, most of the investors held on to the shares through the first trading session yesterday. Based on a total trading volume of 128.2 million shares, the turnover excluding the placement shares accounted for only about 20% of the deal size. The share price fell 5.9%, which left it 3.5% above the placement price.
Ping An offered all of its 105.6 million shares in Value Partners at a price between HK$6.06 and HK$6.33, which translated into a discount of 5% to 9% versus Thursday’s closing price of HK$6.66. The price was fixed at the bottom of the price range for the maximum 9% discount, which was no real surprise since the volatility in the secondary market over the past month and the poor performance of many recent IPOs has made investors highly price sensitive. Given the difficult environment for capital market transactions, investors also have a lot of pricing power at present.
Ping An’s previous sell-down on April 27 was also done at a 9% discount, but because the share price was slightly higher back then, those shares were cleared a price of HK$6.90 apiece — close to 14% above last week’s price. Ping An sold 51 million shares or about one-third of its total holdings in April, raising $45 million. Those shares too were offered at a 5% to 9% discount.
UBS was the bookrunner both for last Thursday’s deal and the April transaction.
Ping An first invested in Value Partners during its $405 million IPO in November 2007, when it came in as a strategic investor, buying 144 million shares or about 38% of the base deal. The Chinese insurance company then added slightly to its holdings when Value Partners did a $103 million top-up placement in October last year. Before it started selling down in April it held a total of 156.6 million shares, or about 8.9% of the issued share capital.