ASM International (ASMI) lost little time in raising $2.1 billion ($270 million) from the sale of a 4.9% stake in its Hong Kong-listed subsidiary ASM Pacific Technology late Monday, just two trading days after the unit announced stellar results for the first three months of the year.
The block sale of shares in ASM Pacific was conducted after the world’s largest maker of semiconductor assembly and packaging equipment reported a first-quarter net profit of HK$736 million ($94.5 million), 450% more than a year earlier and 90% higher on a quarterly basis. Its gross margin also improved by 2.3 percentage points from the end of last year to 39.9%.
These stunning results beat most analyst estimates and on Friday and Monday prompted at least five brokerage houses to raise their price targets for the stock, during which time ASM Pacific's share price rose by 7.6% to HK$114.8 and came close to its all-time high of HK$117.5.
Following the results, Amsterdam and Nasdaq-listed ASMI was quick to pitch the 20 million-share offer through sole bookrunner HSBC at a 6.4% to 8.5% discount, which one fund manager described as “optically generous”.
Unsurprisingly, given the recent surge in ASM Pacific's share price, the deal was priced at the bottom end of the range. ASMI should nonetheless be satisfied with the result since the HK$105 offer price was only slightly below where it was before the unit's first-quarter earnings were announced.
Judging by the secondary market performance on Tuesday, the deal is without doubt the best-performing block trade in recent months, with ASM Pacific shares closing just 3.3% lower. Given the 8.5% discount conceded, that suggests investors who took part in the deal made a return of around 5.2% excluding brokerage fees and commissions.
That is despite strong hedge fund interest, according to banking sources. Hedge fund participation in block trades is sometimes viewed as negative for a share price's short-term performance because these funds tend to sell quickly for fast returns.
Overall more than 50 investors participated in the sale and about 40% of the shares went to long-only funds. A banking source familiar with the deal described the order book as "multiple times" oversubscribed, without elaborating, and said the top-10 accounts got close to 80% of the shares.
Pickup ahead
The event-driven fund manager said ASM Pacific’s transaction could reignite investor interest towards block trades in Hong Kong after a number of disappointing and loss-making trades in the first few months.
Many market observers FinanceAsia regularly speak to also expect activity to pick up next month following the end of the so-called earnings season, with many listed companies in Asia announcing their full-year or quarterly results in April. In what is known as the blackout period under Hong Kong listing rules, companies are forbidden from selling their shares 60 days before they announce full-year results and 30 days before announcing interim results.
ASMI remain the largest shareholder of ASM Pacific after the selldown but its shareholding has dropped to about 34.2% from 39.1%. The company has agreed to a 180-day lockup on its remaining shares.
As with its first selldown of ASM Pacific shares in 2013, ASMI said it will use the proceeds to enhance shareholder value. In 2013 the bulk of the proceeds was distributed to shareholders in the form of dividends; this time the parent said it plans to use the funds to buy back its own shares.
ASMI announced last month that it will repurchase €100 million ($109 million) worth of shares in the secondary market before November 24.
