Bloomberry re-IPO raises $209 million

Bloomberry Resorts has raised Ps8.84 billion ($209 million) from its first follow-on share issue since it listed through a reverse takeover late last year, after fixing the price just above the mid-point of the range.

The Philippine company, which is set to become the first licence holder to open an integrated casino resort in Manila’s new Entertainment City gaming hub early next year, attracted strong demand from international investors in particular and sources said the deal was multiple times covered throughout the price range. In fact, the subscription level and the quality of the book were deemed strong enough for the bookrunners to close the fully marketed deal two days early.

However, according to sources, controlling shareholder Enrique Razon was keen to leave some upside for the new investors and, even before pricing, the bookrunners had issued guidance saying the price would be fixed only slightly above the mid-point.

The shares were marketed in a range between Ps6.55 and Ps8.25 apiece and the final price was set at Ps7.50 early yesterday morning.

The demand was dominated by global long-only funds that had done a lot of work on the company early on, and the allocation was also skewed towards them. However, there was also a good conversion ratio from the one-on-one management meetings during the one-week roadshow and more than 90% of the order amount came from international investors. In all, about 140 accounts participated in the transaction, but more than half the deal went to the top-10 names.

At the final price, Bloomberry is valued at an enterprise value-to-Ebitda multiple of about 7 to 7.1 times, which puts it at a sizeable discount to all the Macau casino operators. However, even at the top of the range, the Philippine company was pitched only at an EV/Ebitda multiple of 7.8 times, which compares with a valuation range of 7.5 times to 10.4 times for the Macau players and explains why some investors were comfortable to pay the maximum price.

Another indication that the deal valuation was viewed to be fair was that the share price didn’t fall all the way to the deal price in the wake of yesterday’s pricing, but closed at Ps9.01. Sure, that was a drop of 24.9% on the day, but the stock was always going to move closer to the deal price and has in fact been doing so for the past few weeks. Early this month it was still trading at around Ps30.

The free float was 8.8% before this deal, but the majority of that was tied up with just one owner and the stock was generally viewed to be overvalued because it was so illiquid. This transaction, which was essentially a re-IPO of the company after the backdoor listing, will increase the float to 19.1%, or 20% if the greenshoe is exercised in full. It was also the first time public investors have really been able to buy into the company since it transformed itself into a casino-play in the making.

Bloomberry sold 1.179 billion shares, which is equal to 11.3% of the enlarged share capital. A 10% greenshoe may boost the deal size to 12.2% and the total proceeds to as much as $230 million, if exercised in full.

As the deal was a top-up placement, technically the shares on offer were secondary shares sold by Prime Metroline, a company wholly owned by Razon. However, Prime Metroline will also subscribe to the same number of new shares at the same price to ensure that all the money ends up with the company, which will use it to fund the Solaire Manila resort in Entertainment City. The total cost for the first phase of this project is estimated at about $720 million.

Bloomberry holds one of the four licences to build integrated tourism resorts in Entertainment City that were awarded in 2009, and started construction on its Solaire Manila project in July last year. Phase one, which will include 300 gaming tables, 1,200 slot machines, one 500-room hotel, seven specialty restaurants and a number of other food and beverage outlets, is scheduled to open in the first quarter of 2013.

Investors tend to like gaming stocks as they offer a leveraged bet on consumption and the Macau casino plays have had a good run so far this year. But sources say they also have a lot of confidence in Razon, who has a good reputation after successfully growing International Container Terminal Services (ICTS) from a company with one port in Manila into a global player with interests in 23 ports and container terminals around the world.

Investors also like the management that Razon has put in place, which has experience of running casinos both in Las Vegas and Macau, and Bloomberry’s partnership with Las Vegas-based Global Gaming Asset Management, which is currently acting as an adviser on the design and construction of Solaire Manila and will also manage the casino once it opens. GGAM has extensive relationships with independent gaming promoters that should help bring VIP players to the resort.

Another buying argument is that Solaire Manila will be the first purpose-build modern casino in Manila when it opens next year and should give Bloomberry a first-mover advantage ahead of the other three licence holders — two of which aren’t scheduled to open their resorts until 2015.

Bloomberry obtained a backdoor listing on the Philippine Stock Exchange late last year following a reverse takeover of Active Alliance, a former manufacturer of printed circuit boards that at the time of the takeover was essentially a listed shell company. The name was changed to Bloomberry in February this year.

CLSA and UBS were joint global coordinators and bookrunners for the follow-on.