FinanceAsia continues setting out why we made the choices we did in our annual Achievement Awards this year.
We began the process yesterday by setting out how we decided the two private banking awards.
Today, we focus on the best Country Awards from across the region, from Bangladesh to Vietnam and involving some of Asia's most famous names.
BEST BANGLADESH DEAL
Summit Group's $79.67 million 12-year and 10.5-year syndicated loans for Summit Barisal Power and Summit Narayanganj Power
Mandated lead arranger: City Bank
Bridge finance providers: City Bank; Bank Asia
Lenders: Islamic Corporation for the Development of the Private Sector (ICD); OPEC Fund for International Development (OFID); Infrastructure Development Company (IDCOL)
Legal advisors: DFDL; Clifford Chance
Few would disagree that Bangladesh needs more power and more private sector involvement, for one of the world’s most populous countries ranks towards the bottom of the World Bank rankings for energy consumption per capita.
The government has an ambitious plan to bridge the supply/demand gap by boosting private sector involvement from its current 4GW share of the country’s total 14GW installed capacity. This landmark deal helped independent power producer Summit Group to add a further 165MW to the tally.
The deal is large and the tenor long by local standards. It also demonstrates how a banking sector strapped for US dollars can aid the process.
City Bank used its local knowledge to provide the bridge financing and due diligence for the project before finding longer-term lenders to offload the execution risk and provide lower-cost, foreign-currency funding.
BEST CHINA DEAL
CIC’s €12.25b ($13.766b) acquisition of Logicor Europe Ltd
Seller (Blackstone): Eastdil Secured (lead); Goldman Sachs (lead); PJT Partners; Morgan Stanley; Bank of America Merrill Lynch and Citigroup
Acquirer: Clifford Chance
Seller: Simpson Thacher & Bartlett
China outbound M&A has been relatively shackled this year due to the more stringent scrutiny on deals since December 2016 and tighter cross-border capital controls.
For us, CIC’s acquisition of Logicor Europe epitomises China’s main deal-making theme this year, and that is that in spite of the fresh obstacles Beijing is still keen to acquire strategically important assets. In this respect, acquiring the warehouse and logistics portfolio company dovetails with China’s Belt and Road ambitions.
The deal also demonstrated another feature of Chinese outbound M&A this year – the state re-emerging as top dealmaker after a run of aggressive offshore takeovers by private companies. It is the largest outbound deal by a Chinese acquirer so far in 2017, as recorded by Bureau van Dijk of Moody’s Analytics.
BEST HONG KONG DEAL
Sale of Hutchison Global Communications to I Squared Capital Advisors for $1.9b
Acquirer: Credit Suisse
Seller: Goldman Sachs; Deutsche Bank
Acquirer: Davis Polk; Herbert Smith
On July 31 Hutchison Telecommunications Hong Kong Holdings, announced the sale of fixed-line operator Hutchison Global Communications (HGC).
The disposal by the blue chip group, CK Hutchison, is the largest telecom transaction and acquisition financing in Hong Kong since 2014. It is also symbolic of a recent trend in the city, insofar as local tycoons are starting to manage capital more actively and are gradually eroding the share price discounts that investors have often assigned to family-run conglomerates.
That gradual unpacking of family-run businesses is creating greater transparency for investors. It is also unlocking value.
In that regard, Li Ka-shing, one of Asia’s richest men and chairman of Hong Kong-headquartered telecoms-to-ports conglomerate CK Hutchison, has created a blueprint for his peers.
The sale will enable Hutchison Telecommunications to focus its resources more effectively on its core business of providing mobile services to its customers and to create value for its shareholders by unlocking the value of HGC.
Competition was hot for such a marquee Hong Kong-based asset with a long operating history.
The seller and its advisers invited alternative fund managers into the process, judging well that many of these funds are flush with cash and able to marshal large quantities of debt, and drew interest from private equity firms such as MBK and TPG Capital.
The eventual winner was global infrastructure investment manager I Squared Capital with its first major acquisition in Asia. Founded in 2012 by former senior Morgan Stanley Infrastructure executives, I Squared and its advisers were able to beat off competition by gathering funds in a timely manner.
When I Squared subsequently syndicated the debt the offer was 3.7 times oversubscribed with commitments from 29 lenders.
Hutchison Telecommunications received a high valuation for its asset, with an enterprise value over 2016 Ebitda of 12.1 times, a significant premium to Hutchison Telecommunications’ historical trading multiple.
BEST INDIA DEAL
IRB Infrastructure’s Rs46.5b ($724m) trust listing
Joint bookrunners: IDFC Bank; Credit Suisse; ICICI Bank; IIFL Holdings
Legal advisers: J Sagar Associates
It took three years to come to market, but when it arrived, India’s first infrastructure investment trust (InvIT) opened up an important new channel to finance the country’s infrastructure development.
The government has estimated it needs $1.5 trillion over the next decade to fund its ambitious programme. InvITs provide developers with an important exit mechanism from mature projects, freeing up cash for new ones.
In bringing the deal to market, the leads main challenge was where to fix the dividend yield. The untested nature of the structure meant that some institutional investors pushed for close to 14%.
In the end, the deal offered a 12% yield, which not only represented a big 540bp pick up to benchmark 10-year Indian government bonds, but also double what the nearest big listed company was offering.
The deal was well received and the new asset class has also proved itself in the secondary market. As of mid-December, IRB InvIT had tightened to a yield around 10.5%. This was the level equity capital markets believed it should settle.
BEST INDONESIA DEAL
PT Paiton Energy $2 billion 13-year and 20-year amortizing notes and $750 million dual currency term loan
Joint global co-ordinators: Barclays; HSBC
Joint bookrunners: Citi; DBS; Deutsche Bank
Joint lead manager: SMBC Nikko
Co-managers: Mizuho Securities; Morgan Stanley
Legal advisors: Adnan Kelana Haryanto & Hermanto; NautaDutilh; Skadden, Arps, Slate, Meagher & Flom; Hiswara Bunjamin & Tandjung; Shearman & Sterling
Mandated lead arrangers and bookrunners: Barclays, Citi, DBS, Mizuho, Shinsei, SMBC, Standard Chartered.
This was one of the easiest awards to judge in 2017 given what a landmark the deal was, not only for Indonesia but also for Asia as a whole.
The region’s last Reg S/144a project bond was executed two decades ago in 1997, but its huge infrastructure financing ambitions will require far greater involvement from Asian bond investors over the coming two decades.
This deal has set a template for others to follow. In addition to fully optimising Paiton’s balance sheet, it also crucially freed up equity, which the project’s original sponsors can use to finance new projects elsewhere.
The effective dividend re-capitalisation was one of the deal’s most innovative features and the Japan Bank for International Cooperation was repaid early for the first time in its history.
Key to getting the size and tenor across the line was an investment grade rating, which was, in turn, greatly aided by Paiton’s long operating history and steady cash flows.
It was also contingent on the bond and loan markets working together: a second innovation. The syndicated loan enabled the bond’s amortisation profile to be back-ended, reducing the kind of cash inflows that long-term investors such as insurance funds dislike.
BEST KOREA DEAL
Bain Capital Private Equity and Goldman Sachs’ $2.7b exit of Carver Korea to Unilever
Seller: Goldman Sachs; Nomura
Acquirer: Bae Kim & Lee; Clifford Chance
Seller: Kim & Chang; Ropes & Gray
Brunswick advised Bain Capital
Unilever said it bought skincare firm Carver Korea from private equity firm Bain Capital and Goldman Sachs for €2.27 billion ($2.7 billion), strengthening its hold in North Asia, the largest regional skincare market in the world.
The announcement came just 14 months after the two funds, between them, bought a 60.39% stake in Carver for about KRW430 billion ($380 million) in the business. Its founder Lee Sang-rok held another 35% stake.
The funds have created a good return for their investors by picking a strong company, helping it to accelerate growth, and then quickly attracting a multinational buyer that can take the Korean company to the next level.
The “Korean wave” of cultural influence, or hallyu in Korean, is taking Asia by storm, with countries across the region hooked on South Korean films, soap operas, and K-pop music. South Korea is also the fourth-largest skincare national market in the world and a source of global beauty trends.
As a result, global cosmetics firms have been rushing to get in on the action. For example, Estée Lauder bought an interest in Have & Be, the South Korean company behind skin care brands Dr. Jart+ and Do The Right Thing back in 2015, while LVMH-backed L Catteron bought a stake in Korea's Clio in 2016.
Building on its origins as a company supplying professional products to beauty salons, Carver has become the fastest-growing skincare business in South Korea through sales of its brand, AHC. AHC’s portfolio is focused on two high-demand consumer spaces: age management, and hydration and nourishment.
Founded in 1999, Carver generated sales of €321 million and an Ebitda of €137 million in 2016, Unilever said in a statement.
Bain Capital substantially expanded Carver’s e-commerce platforms so its products are now sold on major e-commerce platforms in China.
BEST MALAYSIA DEAL
Geely’s acquisition of 49.9% of Proton and 51% of Lotus, from DRB-Hicom
Seller: Wong & Partners
Brunswick advised Geely
When former Prime Minister Mahathir Mohamad founded Proton in 1983 he never anticipated the company would one day end up having to turn to China to be bailed out. Proton was supposed to represent Malaysia’s entry to the ranks of a high-income economy.
What its long-standing financial struggles have demonstrated is the difficulties of building a national car company from scratch. History is littered with such failures in other countries.
Geely, on the other hand, is an example of the opposite trend. China’s second largest privately owned carmaker has successfully hauled itself up the value chain through strategic M&A, most notably its high profile purchase of Sweden’s Volvo in 2010.
The acquisition of stakes in Proton and Lotus may turn out to be equally smart.
An equity stake in Proton gives the auto manufacturer entry to Asean (Association of Southeast Asian Nations), a regional to which it currently has no exposure.
It also helps expand its portfolio at the value-for-money end of the spectrum. High end Lotus, by contrast, gives Geely a marque at the other end.
BEST MONGOLIA DEAL
Government of Mongolia exchange offering and $600 million seven-year notes
Joint lead managers and joint bookrunners: Credit Suisse; JP Morgan
Financial adviser to the Government of Mongolia: SC Lowy
Legal advisers: Mayer Brown JSM; Milbank, Tweed, Hadley & McCloy; Hogan Lovells; GTs Advocates
Singapore listing agent: Allen & Gledhill
The Government of Mongolia started 2017 facing the prospect of a default and debt restructuring that would have set its credit standing back years. It ended the year with two outstanding liability management exercises under its belt, which led us to award it Best Borrower of the year as well.
Of the two deals, we felt the first deserved the most recognition as it faced greater challenges. When the government first contemplated an exchange offering, no one, least of all its paymaster the IMF, was sure a market-driven deal was possible.
In some respects the government got lucky as the commodities cycle was back on an upswing and investors were desperate for yield. But it also had to regain their trust. Its economic programme and the global roadshow it undertook to explain it did just that and the $125 million new money component attracted $3.3 billion in demand.
BEST MYANMAR DEAL
Thai Bev Group’s $742 million acquisition of a 75% stake in Myanmar Distillery
Seller: TPG Capital (self advised)
Buyer: Morgan Stanley
Seller: Latham Watkins
Acquirer: Weerawong C&P
The size and symbolism of this M&A deal meant it had no other competition in its category. It is by far the largest-ever M&A deal from Myanmar and only the second sizeable cross-border M&A deal in the country’s history.
In many ways Myanmar Distillery was an obvious buy for ThaiBev given its 2020 vision to expand across Southeast Asia. However, the sticking point was control and this is why it did not step forward when TPG first shopped the asset around in 2015.
But this time round Morgan Stanley persuaded the company’s founder, Aung Moe Kyaw, to sell down a part of his stake as well, giving ThaiBev overall control.
The investment bank also managed to strike a bilateral deal rather than put its client through an auction process. The valuation was subsequently fixed at a roughly 12% discount to ThaiBev’s own valuation, which both sides agreed was fair based on Mynamar Distillery’s size and growth profile.
BEST PAKISTAN DEAL
Pakistan Stock Exchange Ltd's $42.84 million IPO
Bookrunner: MCB Bank
Financial adviser: Arif Habib Ltd
Legal advisers: Ahmed & Qazi; Ghani Law Associates; Ijaz Ahmed & Associates; Sayeed & Sayeed
Few deals symbolise what is happening in Pakistan more readily than the strategic sale of a 40% stake in the country’s stock exchange and its subsequent initial public offering.
Pakistan is one of the key countries for China’s Belt and Road strategy and now a subsidiary of China Development Bank and three of its domestic exchanges (the Shanghai and Shenzhen stock exchanges, plus China Financial Futures Exchange) are running its bourse.
One of their first decisions after the M&A deal closed at the end of 2016 was to float the exchange. But there were two main execution challenges in offering 20% of its issued share capital. Firstly, the deal needed to come before the end of June for tax reasons and this led to logistical issues during the shortened working hours of Ramadan.
Secondly, it needed to be led by a bank so there was no conflict of interest among its broker members. As a result, the transaction became MCB Bank’s first IPO mandate, giving it a springboard to lead more in 2018.
BEST PHILIPPINES DEAL
BDO Unibank $1.2 billion rights offering
Joint global coordinators: Credit Suisse; UBS; BDO Capital
Joint bookrunners: Citigroup; Goldman Sachs; HSBC
Legal adviser: Martinez Vergara Gonzalez & Serrano
It was a silent year for the Philippines’ equity capital markets in the international arena, with no internationally marketed IPOs to speak of. The secondary market was equally quiet with only a handful of block trades taking place.
So BDO Unibank appears to have made a good decision to act before the market went quiet by raising $1.2 billion through a rights issue in January to strengthen its balance sheet. The transaction was the largest equity offering in Philippine history, overtaking the bank’s own earlier $1 billion rights issue in 2012. It is arguably also the most important corporate action for BDO Unibank in recent years because by raising the large chunk of capital, the lender was able to strengthen its capital ratio ahead of the new bank capital requirements due in early 2019.
Its core equity tier one ratio was 11.1% before the fundraising, just marginally above the statutory requirement of 11%. The ratio increased to 14.7% on a pro-forma basis after the rights issue.
BDO Unibank’s share price has been on a strong run throughout the year after it strengthened its capital base. Year-to-date it is up 41%, outperforming the broader market’s 21% gain.
BEST SINGAPORE DEAL
Grab's $2.5 billion financing round
Financial adviser to Grab: China Renaissance Group
Seller: Hughes Hubbard & Reed LLP; Sheppard Mullin Richter & Hampton LLP
Acquirer: Davis Polk & Wardwell; Herbert Smith Freehills; Paul Weiss Rifkind Wharton & Garrison
Unlike China, Singapore has rarely seen big-ticket, multibillon-dollar private market investments in a single round.
Singapore-based ride-hailing service provider Grab, however, raised $2.5 billion from its Series G round of financing in the third quarter, the largest round ever seen across the Southeast Asia region. That also made the company the biggest unicorn in Southeast Asia, with a valuation of $6 billion, according to CB Insights data.
To put the deal’s significance into perspective, the fundraising proved that Southeast Asia is a “viable market rather than a temporary phenomenon” and it’s going to be “the next growth area” for companies, said Chua Kee Lock of Vertex Ventures, an early investor in Grab and Singapore’s largest venture capital fund.
The money raised from Softbank, Didi Chuxing, and Toyota Motor enables Grab to penetrate further into markets and carry out new business ventures, including mobile payment service GrabPay, which can substitute for cash payment and serve unbanked segments of the population.
BEST SRI LANKA DEAL
Hayleys' $82 million acquisition of Singer (Sri Lanka)
Financial adviser: Asia Securities
Seller: FJ&G De Saram
Acquirer: Julius & Creasy; P.W Corporate Secretarial
This deal represents the largest takeover of a listed company in Sri Lanka’s history and if the country is to live up to its development potential it needs to see more of them.
The trigger was Singer Asia’s decision to sell all of its operating assets across Asia and return money to shareholders. But the execution was down to Asia Securities and its dynamic chief executive, Dumith Fernando, who was able to bring international capital markets standards and expertise to bear thanks to his previous regional roles at global investment banks.
Asia Securities brokered the entire deal, putting the buy side and sell side together. It also needed to iron out a number of sticking points such as local management’s desire for continuity (Singer Asia has retained a board presence), purchasing the branding rights from KKR, and making sure the whole deal stayed secret, which is never straightforward in a country like Sri Lanka.
BEST TAIWAN DEAL
Hon Hai Precision Industry's $500 million convertible bond
Joint bookrunners: Bank of America Merrill Lynch; Citigroup; HSBC
Legal adviser: Simpson Thacher & Bartlett
In what was a relatively quiet year for Taiwan’s capital markets and for inbound mergers and acquisitions, Hon Hai Precision Industry’s $500 million convertible bond was among the rare transactions to be marketed internationally.
Despite adopting a local currency structure, which is much less favourable to international investors, the electronics manufacturing giant pulled off Taiwan’s biggest equity-linked transaction of the year.
Holders of the Taiwan dollar-linked convertible bond are exposed to potential foreign exchange losses as the US is expected to raise interest rates throughout the life of the bond, thus the local currency is likely to depreciate against the dollar. Hon Hai was nonetheless able to attract strong demand for its offering as it is one of the few internationally rated Taiwanese companies with a decent credit profile.
The final conversion price was fixed at NT$111.5, just 8% below Hon Hai’s all-time high share price of NT$121.5. The final order book topped $2 billion from 120 accounts, allowing the issuer to fully exercise the $100 million greenshoe option on top of the $400 million base deal.
BEST THAILAND DEAL
Saha Pathana Inter-Holding Public Company’s $2.902 billion restructuring of four listed entities into one
Financial adviser: Phatra Securities
Independent financial advisers (fair opinion): Avantgarde Capital; Grant Thornton
Legal adviser: Linklaters
This is a deal that demonstrates the kind of value that can be unlocked from unpicking multiple cross-shareholdings and the value investment banks can add when they bring the full force of their structuring experience to bear.
The series of transactions that helped form Saha Group’s flagship entity was its first major capital markets initiative in 20 years. It was a complicated transaction involving four listed entities, four inter-related families, and one Japanese strategic investor.
It also required a large number of stock exchange waivers relating to, among other issues, the number of tender offerings that had to be conducted and the number of independent advisors to oversee the process.
In the end Saha Group not only saved itself Bt1 billion in taxes but also renewed its focus, resulting in a 30% valuation uplift, which puts the group in good stead to forge a more prominent role in the country’s food and beverage sector.
BEST VIETNAM DEAL
VietJet Aviation Joint Stock Company's $164 million IPO
Joint bookrunners and lead managers: BNP Paribas; Deutsche Bank; JP Morgan; Viet Capital Securities
Legal advisers: Milbank, Tweed, Hadley & McCloy; Allen & Overy
During the awards process a number of Asia’s longest-standing bankers said of Vietnam that the last time they felt such excitement about a country was the mid-1990s when China started to open up. For this was the year when Vietnam finally started to live up to expectations and produce the kind of equity deals that international investors could put their money into.
Unlike in China, where the government set the template through its privatisation programme, it has fallen on the private sector to provide the pricing benchmarks in Vietnam. VietJet is one of the country’s most dynamic private sector entities and its flotation represented Vietnam’s first Reg S IPO structure.
The country’s back-to-front IPO processes did not make life easy, but the company and its advisors managed to find workable solutions around investment access (P-notes), settlement risk (escrow), and lock ups (secondary placement structure). The deal also traded well, setting the scene for larger deals to follow.