Block trades

SingTel exits Far EasTone through $272 million block trade

Meanwhile, Rabobank offloads the majority of its stake in India's Yes Bank and last night a group of domestic shareholders were trying to raise as much as $800 million from the sale of shares in Malaysia's Bumi Armada.

Singapore Telecommunications (SingTel) yesterday sold its entire stake in Taiwan telecom operator Far EasTone Telecommunications, raising NT$8.04 billion ($272 million). The deal came after a strong run in the share price during the past six months and on a busy day for block trades in Asia.

Earlier in the day Rabobank trimmed its stake in India’s Yes Bank through a (Rs45.3 billion) $86 million transaction and last night a group of existing shareholders attempted to raise at least $567 million by selling a combined 15% stake in Malaysian offshore services provider Bumi Armada. The latter deal came with an upsize option that could see it expand to more than $800 million, but as of early this morning there was no information about the outcome of that offering.

SingTel received Far EasTone shares as part payment when it sold its stake in Taiwanese fixed-line operator New Century InfoComm Tech in 2006 and has never sold any of them. In that sense the block wasn’t exactly expected. However, with the stock hitting a series of all-time highs this year it is not surprising that the Singapore telecom operator chose to monetise this non-core holding, which in its annual reports has been described as an “available-for-sale investment.”

Far EasTone’s share price has outperformed the benchmark Taiwan index so far this year with an 11.8% gain (index is up about 6%) and hit its most recent all-time high just two days ago. It is up about 43% since it started rallying in October.

Despite that run, the shares were offered at a discount of just 0% to 3% versus yesterday’s close of NT$63.60. However, while that did look tight — especially since the block accounted for about 20 days of trading based on the average daily volume in the past month — it clearly wasn’t too tight as the final price was fixed above the bottom of the range.

According to a source the deal was covered 30 minutes after the 4pm launch and when the order books closed after two hours, the demand had swelled to more than two times the shares on offer.

SingTel sold all its 129.6 million shares, which accounted for 4% of Far EasTone’s share capital. The shares were offered at a price between NT$61.70 and NT$63.60 and sold at NT$62 apiece for a 2.5% discount. Goldman Sachs was the sole bookrunner.

The majority of the demand came from international investors, but there was also strong support from domestic accounts, the source said. There was a good long-only bias to the order book, which is perhaps not too surprising given the tight discount and the defensive nature of the stock. However, long-only investors have been well represented in several other recent block trades as well, which is an encouraging sign. Close to 50 investors were said to have participated in the transaction.

The company reported strong first quarter earnings last week, which showed that its mobile and data revenues grew faster than the competition and its average revenue per user (Arpu) improved by 7.7% year-on-year to NT$871. Revenues increased by 20% and net profit grew by 23.4% from the first quarter 2011 to NT$2.4 billion ($81 million).

Far EasTone also announced a 2012 cash dividend of NT$3 per share, including a special dividend of NT$0.53 per share, which together brought the payout ratio to 110% compared to just 92% in 2011. The dividend is expected to be distributed in the third quarter and may have contributed to the strong interest for the stock.

Yes Bank
Meanwhile, Rabobank sold about three-quarters of its remaining stake in Yes Bank to a small group of mainly domestic investors. The Dutch bank wanted to sell its entire stake, but the deal was complicated by the fact that the foreign institutional ownership in Yes Bank was already close to the 49% limit. Rabobank’s holding counts as a foreign direct investment, so any sale to a foreign institutional investor would bring it even closer to that limit.

In practice this meant that about 75% of any sale would have to go to domestic investors and, according to a source, a pre-sounding of the market suggested that there was only about $50 million to $60 million of domestic demand — which is why Rabobank hung on to a small portion of its shares.

For the same reason, the shares were also offered only to domestic institutions, although some of the buyers also bought shares through their foreign investment arms. The allocation was split largely 75% to 25% between domestic and foreign investors, the source said. In all, about 10 investors participated in the transaction.

The deal, which was arranged by Citi and completed before the opening of the Indian markets yesterday morning, comprised 12.7 million shares, or about 3.6% of the company. They were offered in a range between Rs357 and Rs360, which translated into a discount of 1.65% to 2.5% versus Wednesday’s close of Rs366.05 on the National Stock Exchange of India. The price was fixed at the bottom of the range for a 2.5% discount.

The stock held up well in the wake of the transaction and closed down just 2.3% at Rs357.65.

Rabobank will still own about 4 million shares in Yes Bank, or about 1.1% of the outstanding share capital. There is no lockup on the remaining shares and observers said it is likely to try and offload the rest as and when there is additional demand among domestic investors. At yesterday’s closing price the stake is valued at about $27 million.

Bumi Armada
The Bumi Armada transaction, which was launched after the market closed, is made up of a base deal of 440 million shares and an upsize option of another 175 million shares. They are offered at a price between M$3.95 and M$4.09, which equals a base deal of M$1.74 billion to M$1.8 billion ($567 million to $587 million).

If the upsize option is also exercised in full, the total deal size would increase to $792 million to $800 million — which is close to the $888 million that the Ananda Krishnan-backed company raised in its IPO in July last year.

The price range translates into a discount between 3% and 6.5% versus yesterday’s close of M$4.22, which looks quite tight for a deal of this size — the base deal alone accounts for about 15% of the company and more than 100 days of trading volume. However, as with most Malaysian deals there was expected to be strong support from domestic institutions that should help get it across the line.

The sellers are a group of five domestic shareholders.

The company, which is Malaysia’s largest provider of ships and floating platforms for the oil and gas industry, has performed well since the listing and is currently trading 39% above the M$3.03 IPO price. The stock hit a record high of M$4.48 on April 19.

CIMB is acting as the sole bookrunner, while Royal Bank of Scotland was listed on the term sheet as a sub-placement agent. This suggests that the two banks have already started to work together after CIMB agreed to buy most of RBS’s cash equities, equity capital markets and corporate finance businesses in Asia early this month.

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