Pru unit exits E.Sun through $121 million block

The PCA Life Assurance sell-down is tightly priced but short-covering and a positive view on Taiwanese financial stocks get the deal across the line.

PCA Life Assurance, a subsidiary of UK insurance group Prudential, has sold its remaining 3.4% stake in Taiwan’s E.Sun Financial Holding through a block trade, raising NT$3.57 billion ($121 million).

The deal, which launched after the close of Taiwan trading on Thursday, was offered at a pretty tight discount following a bidding process that was said to have involved at least three banks. It priced at the bottom of that range for a final discount of 3.8% versus Thursday’s close of NT$19.80.

Taiwanese financial stocks have had a good run this year as the sector is benefiting from the closer ties between Taiwan and mainland China and the loosening of regulations to allow Taiwanese bank holding companies to take majority stakes in Chinese banks.

A source said international investors have been sizeable buyers in the past few weeks, which may have added to the confidence among the bidding banks that the deal could get done even at a tight discount.

E.Sun, a private-sector financial holding company, has risen 34% since the beginning of this year and 23% since early July alone. It closed at a record high of NT$20.50 on Wednesday last week (September 18), just before the two-day holiday to celebrate the Mid-autumn Festival. Since then, however, it has come back slightly and there has been a fair amount of short selling, resulting in an increase of the total short position in the stock.

That is not unusual when a stock is trading at record highs, but may also have been fuelled by an expectation that PCA Life was about to sell its remaining shares. The life insurer reportedly reduced its holdings slightly through a club-style deal a couple of months ago. There has also been speculation that some of E.Sun’s other shareholders will take advantage of the high share price to take some profit. The company has a very diversified shareholder base with no investor holding more than 10%.

The short positions would have helped add to the demand as some funds bought into the deal to cover their shorts and the order book was said to have been slightly hedge fund-heavy. But there was also okay demand both from international and local accounts, the source said.

The overall demand was not huge, however, which could be a sign that sellers and bankers are starting to get a bit over-confident after a number of blocks and follow-ons have performed well in the past three weeks. When the order books closed at 8:30pm Hong Kong time, about 30 investors had submitted orders.

PCA Life offered approximately 187.25 million shares at a price between NT$19.05 and NT$19.20, which translated into a discount of 3.0%-3.8%. The deal accounted for about 10 days of trading volume, which made even the wide end seem a bit tight.

It priced at the bottom, at NT$19.05 for a 3.8% discount. Citi was the sole bookrunner.

E. Sun Bank, which is the flagship of the group, opened its first branch in mainland China, in Dongguan in the Guangdong province, in July last year and, according to Taiwanese media, it is evaluating the possibility of setting up more branches in China.

This was the third placement this week after Hong Kong-listed Sunny Optical Technology raised $101 million from a top-up deal on Monday and the creditor banks sold $132 million worth of stock in Korea’s Kumho Tire on Tuesday. Nomura was the sole bookrunner for both of these transactions.

Sunny, which makes camera modules for mobile devices, including smartphones, has held above the issue price of HK$8.06 after the deal and on Thursday closed at HK$8.19. The deal was priced above the bottom of the range at a 4.4% discount to the latest close of HK$8.43.

The Kumho Tire transaction, which accounted for 8.6% of the company and 42 days of trading volume based on the three-month daily average, was priced at Won11,050 for a 7.1% discount to the latest close. There was said to have been substantial demand from domestic accounts, which allowed the price to be fixed towards the middle of the range. The share were initially offered at a discount between 4.6% and 9.2%.

The stock fell to Won11,250 at opening the following day but started to trend upwards almost immediately. On Thursday it closed at Won11,850, which was less than 0.5% below the pre-deal close of Won11,900.

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