Sinopec Kantons raises $346 million for expansion and acquisitions

The top-up placement draws strong demand from a wide range of investors and prices at the mid-point of the indicative range, leading the stock to jump in the after-market.

Sinopec Kantons Holdings, an oil and gas services company, raised HK$2.68 billion ($346 million) from a top-up placement late last week, which it plans to use for future expansion and acquisition opportunities. The price was fixed at the mid-point of the indicative range.

The bookrunners had some visibility of anchor demand at launch and the deal drew strong additional interest on top of that. There was also good support in the wake of the transaction and the share price, which was already up 35% year-to-date, jumped 4.5% on Friday to finish at HK$7.15, comfortably above the placement price of HK$6.50. The Hang Seng Index inched up 0.1%.

The deal launched just before 6pm Hong Kong time on Thursday, and closed about two hours later.

Hong Kong-listed Sinopec Kantons is a trader of crude oil and oil products, and also operates crude oil and oil product terminals, and provides logistics services, including storage and transportation, according to the company. It is also investing in and building liquefied natural gas vessels for the Australia Pacific LNG project. Prior to the deal, the company was 72.34%-owned by Sinopec Kantons International, which is an indirect wholly owned subsidiary of China Petroleum & Chemical Corporation (Sinopec). The remaining 27.66% was owned by the public.

The top-up placement accounted for 19.9% of the existing share capital and comprised 412.5 million shares that were offered at a price between HK$6.36 and HK$6.63. The price range translated into a discount of 3% to 7% versus Thursday’s close of HK$6.84 and a deal size of $338 million to $352 million. Sinopec Kantons International was the vendor.

The price was fixed at the mid-point at HK$6.50 per share, which represented a 5% discount to the latest close.

The deal drew strong demand, mostly from Asia, and was multiple times covered. A wide range of investors, such as sovereign wealth funds, global sector funds, regional funds, hedge funds, private wealth and corporate investors, participated in the transaction, a source said.

The allocations were heavily skewed towards anchors and long-only investors, and more than 80% of the shares went to the top-10 accounts, according to another source. In all, nearly 100 investors submitted orders.

Sinopec Kantons said in a statement on Friday that the transaction provides an opportunity to raise capital in the market to further develop its oil storage and logistics businesses in China and worldwide.

“This further gives the company additional capacity and capability to capture future expansion and acquisition growth opportunities as and when they arise,” it wrote. It also noted that the transaction represents an opportunity to raise capital for the company, while allowing it to broaden its shareholder base and capital base.

The company and Sinopec Kantons International are both subject to a 90-day lock-up.

Bank of America Merrill Lynch was the global coordinator for the deal, and J.P. Morgan and Nomura joined the bank as bookrunners.

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