The controlling shareholder of Gome Electrical Appliances returned to the equity markets yesterday (December 14) with an upsized $176 million offering via ABN AMRO, which also led its IPO in July and first placement in September.
A deal was prompted by an overhang in Gome shares as a result of a convertible held by controlling shareholder Wong Yu Kwang who owned 74.9% pre deal and 65.6% post deal. The lead went out with a base deal size of 157 million old shares and an upsize option of 31.5 million shares. It then added a second upsize option of 31.5 million and sold a total of 220 million shares, representing 13.4% in the company's outstanding equity.
The transaction was marketed at HK$6.20 to HK$6.35 and priced at HK$6.25, equal to a 4.6% discount to the stock's HK$6.55 close.
Books are said to have closed about three times covered with participation by about 35 accounts. About 60% of investors are thought to be new to the stock.
Specialists believe the deal went well for two reasons. Firstly it fits the China consumption play, which has gone down well with investors for most of the year. Secondly, Gome has performed well since late September when the company sold 300 million shares at a 15% discount to the then close of HK$4.70.
The company is currently trading at about 19 times forward earnings, with ABN's analyst forecasting about 12% upside from current levels based on a target price of HK$7.07.
As a result of the deal, the company now has a freefloat of 34.4% up from 25.1% pre deal. The listed company's main assets are 94 electrical stores in China.
