LT Group, a Philippine-listed conglomerate controlled by the family of local tycoon Lucio Tan, has raised Ps32.8 billion ($792 million) from a fully marketed follow-on, after fixing the price at the top of the indicative range.
The deal is the largest-ever equity fundraising targeted at public investors in the Philippines, ahead of Cebu Air’s $611 million initial public offering in 2010, according to Dealogic. It is also the country’s second-biggest equity fundraising overall after BDO Unibank’s $1 billion fully-underwritten rights issue last year.
LT Group was previously known as Tanduay Holdings and focused on the production of distilled spirits, including Tanduay Five Years Fine Dark Rhum. But during the past several months the controlling shareholder has injected a number of its other businesses into the company to create a consumer-focused conglomerate under the new name of LT Group.
The follow-on was the first real opportunity for institutional investors to buy shares in the restructured vehicle and gave them an opportunity to broaden their exposure to the Philippine consumer sector. LT Group is also the only way to access the country’s tobacco industry. And investors came in with vigour, as they liked the company’s attractive set of businesses and the positive consumer consumption story in the Philippines, according to a source.
More than 130 institutional accounts participated in the transaction, the company said in a statement yesterday, adding that the deal was about seven times oversubscribed, excluding the cornerstone tranche. Demand came from the US, Asia and Europe.
As reported earlier, the company had secured 11 cornerstone investors before launch, who committed to take up 1 billion shares, or 62.5% of the base deal. They were global long-only investors, including Fidelity and GMO, the source said.
Aside from the Philippines, the global roadshow took the management to Hong Kong, Singapore, London, New York and Boston. UBS was the sole global coordinator and bookrunner for the deal.
The price was fixed at Ps20.50 per share, which represented a 21% premium to the three-month volume-weighted average price (VWAP) prior to pricing and a 2013 price-to-earnings ratio of 16 times. The deal was marketed at a price between Ps18 and Ps20.50 with the bottom of the range translating into a 2013 P/E ratio of 14 times.
Given LT Group’s unique asset composition, there are no direct comparables, but investors used other listed Philippine conglomerates as a benchmark.
GT Capital, which is the most recently listed conglomerate, is currently quoted at a 2013 P/E multiple of around 17.5 times, according to Bloomberg data. The company is controlled by the Ty family and is involved in a range of businesses including banking, real estate, power generation, auto manufacturing and life insurance.
LT Group’s share price jumped 11.1% yesterday to Ps23, leaving it well above the final offer price. Trading in the stock was halted during the morning session pending the determination of the offer price.
Amid the restructuring, the upward momentum in the stock has accelerated recently and it is now up nearly 60% since late March. Meanwhile, the Philippine Stock Exchange PSEi Index, which rose 0.9% yesterday, is up about 6.6% during the same period.
“We are extremely pleased with the strong level of interest that the LT Group received from the global investor community, and we welcome them as our shareholders,” LT Group president Michael Tan wrote in the statement. “This is a testament to the positive long-term outlook on the Philippine economy and we remain fully committed to support the continuous growth of our country and [LT Group].”
Re-IPO
Given the limited free-float and thin trading volumes prior to the offering, the share sale was carried out in the same way as an IPO, with a full management roadshow and a price range — the kind of deal commonly referred to as a re-IPO. One key difference versus an actual IPO was the fact that there was no retail portion.
Prior to the deal, the company had a free-float of just 10.4%, with the remaining 89.6% owned by the Tan family through a holding company called Tangent Holdings.
The deal took the form of a top-up placement with the first part of the transaction consisting of the sale of existing shares by Tangent. The second part saw Tangent subscribe to the same number of shares at the same price to ensure all the proceeds end up with the company.
The base deal consisted of 1.6 billion shares. There is also an overallotment option of an additional 240 million shares, which could increase the deal size to as much as $910 million.
LT Group’s deal gave investors their first chance to gain exposure to PMFTC, the Philippines’ biggest tobacco manufacturer and distributor. The company has a market share of 90% and is a joint venture between Philip Morris Philippines Manufacturing and Fortune Tobacco.
In addition to the tobacco and spirits businesses, LT Group is also involved in beverages, banking and, to a smaller extent, properties.
The company plans to use the proceeds to help fund organic growth initiatives at Asia Brewery, Tanduay Distillers and Eton Properties Philippines, to support growth of the company’s banking business, and to repay debt held by certain LT Group companies as part of the reorganisation of the group.
