Placements in GT Capital and Shin Corp raise a combined $1 billion

Philippine conglomerate GT Capital and its controlling shareholder sell $350 million worth of shares, while a Temasek-controlled entity raises $685 million from its third sell-down in Thailand’s Shin Corp.

Placements have been a key theme this week with several deals out of Hong Kong, and yesterday Southeast Asia joined the action as well with two large transactions that together raised $1 billion. The deals were well received and confirmed that investors are keen to add more risk to their portfolios.

Philippine conglomerate GT Capital was first out with a combined primary share follow-on and sell-down by the controlling shareholder, which hit the market at about 4pm Hong Kong time. After being upsized by close to 13% to facilitate the allocations, the deal size was fixed at Ps14.24 billion ($350 million).

Three hours later, Temasek-controlled Cedar Holdings launched a block trade in Thai telecom and media holding company Shin Corp that ended up raising Bt20.87 billion ($685 million). The deal came 12 months after Cedar’s previous sell-down in January last year and will reduce its stake in Shin Corp to 13.3% from 23.6%, according to the term sheet.

Both transactions came on the back of a strong share price performance last year and attracted solid interest from both international and domestic investors. Notably, GT Capital received more than $1 billion of orders, which is pretty massive for a deal out of the Philippines. Both deals also priced at the mid-point of their respective ranges.

GT Capital
GT Capital is controlled by the Ty family and involved in a range of businesses including banking, real estate, power generation, auto manufacturing and life insurance. The company listed in April last year after a highly successful IPO and since then its share price has gained 48%. It closed at a record high of Ps680 on Monday this week.

The offering initially comprised 20.375 million shares, of which 16.3 million were new shares sold by the company. The remaining 4.075 million shares were existing stock put up for sale by a company called Grand Titan Capital, which is owned by the Ty family.

The strong demand and big orders caused some allocation issues and, to make things a bit easier, Grand Titan agreed to add a few more shares to the mix. This increased the total offering to 22.975 million shares, or 14.5% of the existing share capital, and resulted in a 70-30 split between primary and secondary shares.

The shares were offered at a price between Ps610 and Ps630 each, which translated into a discount of 6.3% to 9.2% versus yesterday’s close of Ps672. It was fixed at Ps620 for a 7.7% discount and a total deal size of $350 million, which makes it one of the largest overnight follow-ons in the Philippines ever. It is also a very large deal relative to GT Capital’s IPO, which raised $503 million, including the fully-exercised greenshoe.

According to a source, the deal attracted more than 90 investors and even after the upsize was about three times covered. The strong interest had become evident during the wall-crossing process earlier in the week and the deal was essentially already covered when the books opened yesterday.

The company saw strong demand for its IPO as well and many of the international funds that bought the stock then returned to add to their holdings through yesterday’s placement. Overall, the buyers included large US and regional long-only funds, big domestic accounts and hedge funds.

Investors like GT Capital because it acts as a proxy for consumer spending in the Philippines, and because the group has a good reputation when it comes to corporate governance. Importantly, it has also delivered on its promises at the time of the IPO to increase its holdings in some subsidiaries, which has helped to boost earnings.

On top of that, the placement will help to increase the free-float and liquidity in the stock. During the past three months, slightly more than 200,000 shares have changed hands on an average day, which makes it difficult for large investors to accumulate a meaningful position in the company. However, GT Capital’s holdings include stakes in several companies that have listings of their own, such as blue-chip Metropolitan Bank and Trust (Metrobank).

Grand Titan’s holdings in GT Capital will drop to 60% from 70% as a result of this deal, although the Ty family also owns shares through a few smaller entities. There will be a six-month lockup for both the company and Grand Titan on the back of this transaction.

UBS was the sole bookrunner for the placement and also led the IPO last year.

Shin Corp
At $685 million, the Shin Corp deal ranks as the third largest overnight block trade in Thailand after Siam Cement’s $1.1 billion sell-down in PTT Chemical in December 2010, and a $723 million sell-down in hospital operator Bangkok Dusit Medical Services in October last year.

Temasek has been expected to continue to reduce its stake in Shin Corp after two previous sales by Cedar in August 2011 and January last year, so the transaction didn’t come as a surprise. However, the timing and size of the deal may have. The previous two sell-downs raised $305 million and $254 million respectively.

Either way, investors were happy to pick up the stock and, according to a source, about 70% to 80% of the demand came from international investors. Domestic accounts also put in a strong showing, but their deal sizes were smaller. The buyers included large long-only funds and hedge funds and, in all, close to 90 investors participated in the transaction. However, according to a source, 70% of the allocations went to the top-10 accounts.

One reason for the strong demand may have been the fact that Cedar’s sell-down will boost the free-float to 45% and that will in turn have implications for the company’s index weightings.

But Shin Corp is also viewed as an attractive stock because of its high dividend payments. In that sense, the transaction also fits into a global theme that have seen deals from several yield-plays hit the market in the first couple of weeks this year. According to Dealogic, four of the five US IPOs that have filed initial terms so far this year have also been from yield-focused vehicles, including real estate investment trusts (Reits).

Cedar offered 330 million Shin Corp shares, or 10.3% of the company, at a price between Bt62.75 and Bt63.75. Based on yesterday’s closing price of Bt67, this translated into a discount of between 4.9% and 6.3%.

The deal was covered across the price range, but the price was fixed at the mid-point, at Bt63.25, for a 5.6% discount. This is quite tight for a deal that accounted for about 25 days of trading, based on the average daily trading volume in the past three months. It is also significantly narrower than the 7% discount that Cedar achieved a year ago — even though this latest deal is more than two times bigger. The August 2011 deal was priced at a 10% discount.

Shin Corp’s share price has also risen 60% in the past 12 months. The January 2012 block trade was done at a price of Bt40.40.

Temasek, together with Siam Commercial Bank and a number of domestic Thai partners that are co-owners in Cedar, bought a controlling 49.6% stake in Shin Corp from the family of then prime minister Thaksin Shinawatra in 2006. They paid a total of $1.85 billion or Bt49.25 per share and later added to their interests through a tender offer.

The initial deal turned out to be highly controversial, both because the assets were sold to a foreign buyer and because the Thaksin family claimed (at the time successfully) that the profitable transaction should be exempt from capital gains tax. The deal triggered widespread protests that eventually led to Thaksin being ousted as prime minister through a coup in September 2006.

Aside from its investments through 49%-owned Cedar, Temasek also owns another 41.6% in Shin Corp through a wholly-owned entity named Aspen Holdings. Temasek has previously said that Aspen has no immediate plans to sell its shares in the company.

Shin Corp provides telecom and internet services under the Intouch brand and is also involved in satellite communications, media and advertising.

Credit Suisse and Morgan Stanley were joint bookrunners for the transaction.

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