Shell prices Philippine unit's IPO at mid-point

Investor demand for Pilipinas Shell Petroleum indicates confidence in the Philippine economy and desire for a rare, internationally recognized IPO in Manila.
Pilipinas Shell receives institutional support for IPO
Pilipinas Shell receives institutional support for IPO

Pilipinas Shell Petroleum is edging closer to listing its shares on the Manila bourse after receiving strong demand from international investors for the institutional tranche of its Ps18.4 billion ($380 million) initial public offering.

Final pricing for the 275 million-share deal was set at Ps67 per share, the mid-point of the Ps64 to Ps70 indicative price range. That is also at the upper end of the revised guidance (Ps65 to Ps67) done during the final days of the bookbuild.

At this level, the company will command a market capitalisation of $2.25 billion, or about 9.4 times forward enterprise value-to-Ebitda.

Sources familiar with the situation said foreign investors were the highlight of the transaction as they were allocated about 80% of the final book. They include eight anchor investors who have agreed to commit to about 45% of the deal at launch.

"This is a very good deal from the issuer's perspective, both in terms of the execution process and the quality of investors," said one of the sources.

In the end, the order book was oversubscribed at the final pricing level with over 60 accounts bidding, according to the source. There were several orders by hedge funds that were zeroed out in favour of long-only investors.

Another source said there were orders from some of the world’s biggest global asset managers, indicating confidence in the prospects of Pilipinas Shell Petroleum. In turn, that also suggests international funds remain bullish about the Philippine economy, despite drastic changes in the political direction following the election of Rodrigo Duterte early this year.

Such strong demand also shows the scarcity value of investing in the Philippines’ primary market. Sizeable IPOs are rare, particularly one issued by a brand recognized internationally.

Royal Dutch Shell will remain as the controlling shareholder with over 50% interest in the company post-IPO.

The next step for Pilipinas Shell is to prepare for a retail offering between October 19 and October 25. The shares are set to start trading on November 3, meaning that investors could trade them for a few days before potential volatility kicks in following the November 8 presidential election in the US.

JP Morgan is the sole international bookrunner of the IPO, while BPI is the domestic bookrunner. Rothschild is the financial adviser.

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