CKI raises $300 million from top-up placement

Cheung Kong Infrastructure (CKI) has raised HK$2.3 billion ($300 million) from a top-up share placement. The bookbuilding was launched at around 5pm Hong Kong time on Wednesday and closed after about four hours. The pricing and allocations went out early yesterday morning.

CKI, part of Li Ka-shing’s Cheung Kong Group and the biggest publicly listed infrastructure company in Hong Kong, offered 50.9 million shares at a price between HK$45.25 and HK$46.50 each, which translated into a discount of 3.1% to 5.7% versus Wednesday’s close of HK$48.

The price was fixed near the low end at HK$45.75, a 4.7% discount from Wednesday’s close, and a discount of about 3.8% to the average closing price during the previous five consecutive trading days.

The transaction came at a favourable time. Improved economic data from the US is inspiring optimism in the global financial markets, and Hong Kong’s Hang Seng Index now looks poised to erase losses that it logged last year — it is up about 16% so far this year after a 20% drop in 2011. And, just last week, CKI reported record profits of HK$7.7 billion for the year ended in December.

The pre-transaction price of HK$48 was also CKI's highest close since September last year. The stock has gained more than 4% since the start of the year, after a 32% rise in 2011. The share price did fall 1.1% yesterday compared with an almost flat finish in the broader Hong Kong market, but ended trading at HK$47.45, which was 3.7% above the offer price.

Hutchison Infrastructure, the company’s controlling shareholder, agreed to sell 50.9 million existing shares at a price of HK$45.75 each, and then to subscribe to the same number of new shares at the same price, CKI said in a statement filed to the Hong Kong stock exchange yesterday.

After completion of the deal, Hutchison Infrastructure’s stake in the company will be reduced to 77.96% from 79.61%, according to the statement.

The offering accounted for about 2.1% of CKI’s existing share capital, and was equivalent to about 24 days’ average trading volume during the past 12 months at 2.12 million shares.

The deal was multiple times covered at the issue price with a majority of the shares allocated to long-only investors — and a significant portion of that went to existing shareholders, a source said. More than 80 accounts were present in the high-quality order book.

The bookrunners focused on allocating the deal to long-only institutions, which seems to have been a successful strategy as the stock was trading above the issue price yesterday, the source said.

The Hong Kong-based infrastructure specialist plans to use the proceeds for general funding purposes, according to the company's stock exchange statement.

In fact, the latest move follows a series of fundraising activities during the past 12 months. CKI has diversified investments in energy, transportation and water infrastructure, across operations in Hong Kong, China, Australia and other countries, and has been active in acquisitions.

Last month, CKI sold a $300 million privately placed perpetual bond, with the shares to be held by the fiduciary, The Bank of New York Mellon. At the time, analysts said the deal would increase the company’s ability to make acquisitions and reduce its gearing levels, and that it planned to sell shares at a higher price in the future to redeem the bonds.

In July 2011, the company raised about $438 million from a top-up placement partly to fund the acquisition of the entire issued share capital of UK water company Northumbrian Water.

The company said in an earnings statement last week that it had ample cash on hand and a strong balance sheet as a result of these fundraising activities, and that it continues to be in an excellent position to pursue infrastructure projects around the world.

In the same statement, CKI said its businesses in Hong Kong, China, the UK, Australia, New Zealand and Canada generated strong results during the year, and its profit attributable to shareholders jumped 54% from a year earlier.

Among its past acquisitions, in April last year CKI increased its stake in the Meridian Cogeneration Plant, a natural gas-fired cogeneration plant in Canada, and in October it led a consortium of investors to buy Northumbrian Water.

These acquisitions, in particular the water business, are expected to act as a growth catalyst, similar to UK Power Networks, which it bought in 2010, the company noted.

Citi and HSBC were joint bookrunners.