The integrated supplier of marine fuel, which had been seeking to raise up to $373.6 million, confirmed the decision in a press release Tuesday, the day it was expected to fix the price, but didnÆt elaborate on the reasons. However, rather than saying that the offer was ôbeing postponedö which seems to be the most common phrase in similar situations, the company said it had ôdecided not to pursue plansö for an IPO on the Singapore main board, which suggests it is unlikely to return with a revised offer any time soon.
The deal was to have been the second largest listing in Singapore this year after Thailand-based brewer Thai Beverage raised $866 million in May.
According to sources close the offering process, investors in general had struggled to understand ChemoilÆs business as there are no direct comparables in the region and with so many other investment choices around, they had seen no compelling reason to dig into it a bit deeper.
Since the company buys, transports and sells an oil-based product many investors also got spooked by the sharp decline in crude oil and marine fuel prices over the past couple of months. While in fact Chemoil has very little direct exposure to oil prices as it essentially adds a fixed commission on top of the price it pays for the fuel at the refiners, there was also the added concern that the decline in fuel prices may be signaling a slowdown in the global economy which could potentially have a negative impact on the shipping industry.
The crude oil price has slid 22% in a straight line since August 7 when it was at $77, to about $60.40 yesterday. It is off about 5.3% since Chemoil launched its roadshow on September 18.
The first signs that all was not well came when joint bookrunners JPMorgan, Morgan Stanley and UBS decided to lower the bottom end of the $0.65 to $0.85 price range to $0.55 ahead of the final day of bookbuilding. This suggested that investors were unwilling to pay as much as $0.65 per share, which would have valued the company at about 11.5 times its 2007 earnings, based on consensus syndicate forecasts.
At $0.55 per share the 2007 PE multiple would drop to 9.9 times. That would equal a slight discount to Noble Group, which trades at about 10.5 times and was used as a comparable by many investors given its similar business and the fact that it too is listed in Singapore. Describing itself as a global supply chain manager, Noble essentially supplies and trades agricultural, energy and industrial products.
World Fuel Services, which trades at about 14 times next yearÆs earnings and would have been a closer comparable given that it is one of the worldÆs largest marine fuel traders, wasnÆt looked at as closely since it is based in the US. At the top end of the indicative range, Chemoil too would have been valued at about 14 times
However, as an integrated supplier to global shipping giants like AP Moller-Maersk, Evergreen Marine and Yang Ming Marine Transport Corp. Chemoil adds more value to the process than a trader like World Fuel. Essentially a ôgas station for shipsö, it controls the entire flow of the fuel from the purchase at the refiners, through the blending of it to proper quality and the transportation and storage, to the delivery to the end-customer.
In the end though, even at the lower price there appears to have been insufficient demand for the company, which was originally set up in the US in 1982 but is now incorporated in Hong Kong and headquartered in Singapore.
There was talk of a few meaningful orders from global absolute return investors who saw value in the business as the supply of new ships grow and amid an expected increase in the demand for container transport, but given the outcome they obviously werenÆt large enough to carry the deal.
Chemoil is the first Singapore IPO of size to be pulled since Cambridge Industrial Trust cancelled a $180 million fixed-price offering in mid-June. After being downsized and leveraged up to provide a higher yield, the Cambridge REIT succesfully returned to the market a month later, raising $131 million.
Chemoil offered 439.5 million shares, or 30% of the capital, which at the bottom of the new range would have meant a deal size of $242 million. Three per cent of the offer was earmarked for Singapore retail investors.
Japanese oil company Itochu was due to sell a small number of secondary shares, amounting to 16.7% of the total offer. Itochu owns the 50% of the company that is not owned by the founder Robert Chandran. The remaining shares were all new.
The proceeds from the sale were to have gone primarily towards potential acquisitions and joint ventures and towards the purchase of more ships and barges and the construction of new terminal facilities with the aim of making the business more cost efficient.
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