The placement, which accounted for 8.2% of the existing share capital, was done through a bought deal which saw parent company Henderson Land Development sell 230 million existing shares to Credit Suisse, which offered them on to investors at a fixed price of $13.55 apiece. Henderson Land will then subscribe to the same amount of new shares.
The price translated into a 7.2% discount to yesterdayÆs (April 19) close and was also slightly below the most recent privatisation offer, which at the time of the shareholdersÆ vote in January valued the company at HK$13.64 per share.
The parent company initially offered one Henderson Land share for every 2.6 Henderson Investment shares to take its subsidiary off the market, which at the time (November) valued the company at HK$13.23 per share - a premium to the market price. That offer was subsequently raised to one Henderson Land share for every 2.5 Henderson Investment shares, but more importantly, Henderson LandÆs share price also edged higher which increased the value of the offer even more.
Minority shareholders still rejected the proposal on the grounds that it was too low in relation to the companyÆs net asset value, which analysts estimated at $17 to $20 per share. Similar objections had toppled a privatisation attempt at the end of 2002.
Some investors were said to have been hesitant about buying into the company so soon after a privatisation attempt failed - there has been some speculation in the market that the group will try again when the lock-up expires in a year's time - but there were still enough interested parties for the order book to be ôwell subscribed,ö according to a source familiar with the transaction.
About 70 investors participated in the sale, which was the largest Hong Kong block trade since PetroChinaÆs HK$18.98 billion ($2.4 billion) placement of new shares in August last year û not counting a HK$3.22 billion share sale by New World Development in December, which was done almost as a private placement to only a handful of accounts.
Henderson InvestmentÆs placement accounted for 158 days of trading based on the one-month average trading volume, and 70 daysÆ trading on a three-month basis because of the unusually large trading volumes in the lead up to the privatisation vote in January.
The Asian portion of the book closed after about two hours, while European and offshore US investors were given some additional time to look at the deal. Still, Asian investors took the majority of the shares, while the remainder were split evenly between Europe and offshore US accounts, the source said.
ôThis really does mark a complete reversal of the original intent, but Henderson Land has acknowledged that the market didnÆt want to privatise the company and it is now seeking to grow its investments and diversify the revenue,ö says one observer. ôBecause the discount to net asset value has narrowed since the rejected privatisation proposal, this is an attractive level for the company to raise capital.ö
According to investors, Henderson Investment didnÆt specify what it would use the money for û saying only that it would go towards ongoing working capital needs, which some said made the placement seem opportunistic.
There will be some dilution as a result of the new share issue, but existing investors should also benefit from the fact that the free-float will increase to about 30.8% from just over 25% before the deal.
Prior to the transaction, Henderson Land held 73.5% of the company, while its chairman Lee Shau-kee owned 1.4% as a private investment. After the deal their combined stake will fall to about 69.2%.
Henderson Investment is active within gas distribution through its listed associate company Hong Kong & China Gas, which accounts for 84% of the companyÆs net asset value. It also holds sizeable stakes in Hong Kong Ferry (Holdings) and Miramar Hotel & Investment and has unlisted property development and toll road operations as well as a majority stake in recently privatised broadband Internet provider Henderson Cyber.
The companyÆs share price reached an all-time high of HK$15.50 in late February, partly due to a strong performance by Hong Kong & China Gas, but has traded largely sideways with a downward bias since then. Yesterday, it dropped 1.02% to HK$14.60 in an otherwise strong market.
¬ Haymarket Media Limited. All rights reserved.
