AIA offloads more than 60% of its stake in CP All

The first half of 2012 has not been kind to investors, so it is perhaps no surprise that there has been a pickup in block trades in Asia during the past couple of weeks as some of them have tried to secure a bit of last-minute profit amid a tentative market rebound from the lows in early June.

Making use of the very last window to do so, pan-Asian life insurance company AIA sold about 62% of its stake in Bangkok-listed CP All during the lunch break on Friday, raising Bt4.5 billion ($141 million). The deal was offered at a fixed price and was well received, allowing the deal size to be increased by two-thirds.

Most Asian markets added between 1% and 3% on Friday after EU leaders agreed on a series of measures to address the eurozone crisis, including the introduction of a single bank supervisor with the ability to provide capital directly to ailing banks. They also indicated that they will allow funds from the European Financial Stability Facility (EFSF) to be used to buy government bonds in the secondary market to help reduce borrowing costs in countries like Spain and Italy.

The announcement prompted investors to add more risk to their portfolios and also triggered quite a lot of stop-losses. Some market observers said that this caused a bit of a short-squeeze as overall volumes were still quite light. Notably, Hong Kong was heading into a long weekend — markets were closed yesterday following Sunday’s recognition of the 15-year anniversary of the handover to China — which might have reduced the amount of activity normally seen on the final day of a quarter. It might also have made traders a bit nervous about staying short as global markets seem increasingly inclined to rally on good news. Indeed, the buying continued in both Europe and the US, with Nasdaq adding 3% and the Dow Jones index closing 2.2% higher.

The Hang Seng Index also gained 2.2%, which left it higher both for the week and the month. However, with a 5.5% gain during the first six months it is still lagging well below Asia’s top performers this year. Leading that list is the Philippines with a 20% gain, followed by Thailand with 14.3% and India with 12.6% (the Bombay Sensex index).

CP All, which owns the 7-Eleven franchise in Thailand and is part of the country’s powerful Charoen Pokphand group, has had an even stronger first half than the overall Thai market, supported by an appetite for consumer sector stocks in Southeast Asia and a good first quarter as business returned to normal after last year’s flooding (net profit improved 32.4% year-on-year). By the time the AIA block hit the market, the company’s share price was up about 42% year-to-date.

Hong Kong-listed AIA, through its American International Assurance unit, offered 75 million shares plus an upsize option of an additional 50 million shares. Given that the transaction was completed during the two-hour lunch break, the price was fixed at launch at Bt36 per share, which represented a 2.7% discount versus the final trading price in the morning session.

The discount looked quite tight compared with other recent block trades in Asia, but seems to have been sufficient for the size of the deal. Even including the upsize option, it accounted for only 1.4% of the outstanding share capital and about six days of trading, based on the daily average during the past month.

The tight discount meant hedge funds weren’t particularly keen to take part (although a few of them did), but other investors seemed happy enough with the price and a source said the base deal, which was done on a first-come-first-served basis, was covered in 10 minutes. The bookrunners then started to build a book for the upsize option and when they stopped taking orders after one-and-a-half hours, they had enough demand to sell all the 125 million shares.

The buyers included domestic asset managers and high-net-worth individuals, as well as big long-only Asian funds. About 40 investors participated in the transaction, including 30 international accounts. According to the source, almost two-thirds of the deal was allocated to international investors.

Having finished the morning session slightly higher at Bt37, CP All’s share price slipped in the afternoon following AIA’s sell-down and finished the session at Bt35.50 — down 3.4% on the day and 1.4% below the placement price. The Thai stock market also underperformed all other major markets in Asia, gaining just 0.1% on the day.

AIA bought into CP All at the time of the company’s IPO in 2003, but has been trimming its holdings already so the sale shouldn’t have come as a huge surprise. In July last year it raised $106 million from the sale of a slightly smaller stake. Friday’s sell-down will reduce AIA’s stake in CP All to about 0.9% from 2.3%, according to a source. Based on the current market price, its remaining 78 million shares are valued at about $87 million. They are subject to a lock-up of 60 days.

According to sources, this was the first lunchtime block trade ever in Thailand. That it is happening now gives some indication of how keen bankers are to grab the opportunity to do a trade as soon as a window opens up, as they are well aware that it may not stay open for long.

The CP All block trade was arranged by Bank of America Merrill Lynch and Phatra Securities.