Link Net’s largest shareholders raised roughly Rp5.5 trillion ($455 million) after cutting the number of shares on offer amid market turbulence and weak demand.
Private equity firm CVC and Indonesian internet company First Media sold 30% of their combined stake in the broadband and cable TV arm of Indonesia’s Lippo Group on Friday at Rp6,000 per share, below the initially marketed range of Rp6,200 and Rp6,700 per share, according to a term sheet seen by FinanceAsia.
All of the company’s shareholders had initially sought to sell 40% in the company — CVC and First Media planned on offloading a combined 33% stake while the remaining 7% stake was to be sold by two private equity funds. In total, 1.217 billion shares were on offer.
But poor market conditions kept investors on the sidelines and forced the shareholders to reduce the number of shares by 10% in total, to 912.8 million shares.
The share sale comes amid turbulent markets that have led to billions being yanked from global equity markets over the past few weeks. According to data provider EPFR Global, global equity funds experienced outflows of $2 billion during the week of October 13 alone.
Lousy conditions have weighed on a number of recently listed companies’ performance and also forced others to revise the terms of their offerings. Indonesian taxi-cab company BlueBird wound up cutting its deal to $200 million from $300 million, while Bangkok Airways sliced its secondary offering from 210 million shares to 60 million shares.
Since peaking on September 3, Hong Kong’s Hang Seng Index has dropped 8% up to October 24, while the Jakarta Stock Exchange Composite Index is down 3% from all-time highs mid-September. Many analysts expect Indonesia’s bourse will continue to decline in the run up to the impending fuel price hike, expected in November.
“Risk appetite is next to zero,” one banker close to the deal told FinanceAsia. “I don’t think people have the appetite to plough into the market [right now.]”
CVC sold 473.1 million shares, or 15.6%, while First Media sold 226.7 million shares, or 7.4%. Post-sale, both own 33% of Link Net each, according to the term sheet.
Allocations were still being sorted on Friday night but a second banker said there were a handful of long-only institutional investors and hedge funds that participated in the deal.
The bankers on the deal — joint global coordinators Credit Suisse and Goldman Sachs, joint bookrunners CIMB and Ciptadana, and co-leads BNP Paribas and Deutsche Bank — knew they had to deal with dire market conditions and, as such, ran an extensive cornerstone process to lock up demand.
Some 90% of the book was covered when it began the formal pre-marketing process. Columbia Wanger, Goldman Sachs Investment Partners, Morgan Stanley Investment Management, Myriad Asset Management, Neuberger Berman, Och-Ziff Capital Management and William Blair pledged a combined $250 million. The cornerstone investors account for 56% of the total deal-size. There were nine in total.
The syndicate was also able to lock in an additional 21 anchor accounts, which account for 47% of the book.
Still, securing additional investors to come into the book was not easy, with a second banker acknowledging how difficult it was given the current environment.
“People don’t want to come into these kinds of deals in volatile markets like this,” he told FinanceAsia. “We spent a good part of yesterday getting them comfortable. The cornerstones were key. We ended up with a structure that works.”
Since Link Net raised Rp486 billion in its June IPO, it has returned more than 300%.
CVC first purchased a 49% stake in 2011 for a total of $274 million, and has also worked alongside the Lippo Group after acquiring a majority stake in Matahari Department Stores in 2010.
