ProMOS relaunches and prices postponed GDR offering

Recovery in share price allowed for quick return to market; price is fixed at 8% discount after solid demand.
ProMOS Technology last night (July 6) completed the follow-on GDR offering that it pulled from the market just three weeks ago, taking advantage of a slight recovery in the share price and positive momentum in the sector following two successful offerings by other memory chip makers over the past one and a half weeks.

The Taiwan DRAM manufacturer raised NT$10.75 billion ($333 million) from the sale of 100 million global depositary receipts, after an option to issue an additional 12.5 million units on top of the base offering size of 87.5 million GDRs was utilised in full.

The total offering accounted for about 14.7% of the enlarged issued share capital.

The price was fixed at $3.33 per GDR, which corresponded to about NT$10.75 per common share (each GDR accounts for 10 shares) and translated into an 8% discount versus yesterdayÆs closing price of NT$11.70. The shares were offered to investors at a discount of 4-9%.

Last nightÆs discount range was slightly tighter than the 5-10% initially offered in the previous attempt to sell the GDRs (the range was reduced to 7-10% towards the end of the roadshow). However, the absolute price achieved by the company this time around was significantly higher as the share price has bounced 12% from the NT$10.45 where it traded at the time the previous offering was due to price.

Even so, investor were said to have been even more keen about the ABN AMRO Rothschild and JPMorgan-led offering than they were three weeks ago. According to one source close to the deal, the order book was more than two times covered with about 50 accounts taking part.

Individual orders were also larger than those submitted last time, and as evidenced by the fact that the priced was fixed away from the bottom end, there was also less price sensitivity. The latter was partly triggered by offshore Taiwan accounts, which were said to have been willing to pay more for the shares and thus forced other investors to rethink their orders to make sure they werenÆt left out.

In the end, Taiwan offshore accounts took about 20% of the deal, while 30% went to long-only funds and 50% to hedge funds û many of which were likely in it for the arbitrage game with the hope of making money off the 8% discount to the local shares.

In terms of geographical distribution, 48% went to Asia, 18% to Europe and 34% to the US, sources say.

According to market sources, the order book was fully covered last time as well, but the company, which needs the money to pay for new machinery and equipment to be used in connection with a capacity expansion, still decided to postpone the offering after completing the entire roadshow and bookbuilding as it felt it couldnÆt achieve its fundraising targets.

That first deal was launched on June 8 at a time when the underlying shares were trading at NT$11.95. When the order books closed a week later, however, the share price had tumbled 16% since June 6 to a mere NT$10.45, significantly reducing the amount of money the management could achieve from the sale.

The decision to postpone was taken on June 14, the same day as mainland property developer Shui On Land pulled its Hong Kong IPO of almost $1 billion for similar reasons.

To avoid the same thing from happening again, the bookrunners chose not to attempt another marketing roadshow, but to offer the GDRs through an accelerated bookbuilding process instead.

Aside from the slight turnaround in the broader market, optimism about the DRAM manufacturers has also been increasing in recent weeks amid upbeat projections on selling prices from various industry players, including Samsung Electronics.

Most analysts are now projecting the sector will see a continued pick-up in the second half of this year, with some even suggesting the peak may not come until the second half of 2007.

Such views, together with the companyÆs impressive turnaround story and strong market position, were partly responsible for the success of the $1.5 billion sale of mainly secondary shares in Hynix. The Korean manufacturer of DRAM and Nand Flash memory chips priced its slightly downsized offer at a tight discount of 2.2% after international institutions asked for $4.5 billion worth of shares.

A day later, Taiwan-based Powerchip Semiconductor Corp. became the first Asian company in six weeks to raise fresh capital from a convertible bond issue when it completed a $328 million combination deal that also included a sale of global depositary shares.

As an indication of the demand for that deal, both tranches were priced at the tight end of their indicative ranges û in the case of the GDS actually even tighter than the original guidance.
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