The Goldman Sachs-led deal is expected to make a strong debut after recording healthy oversubscription levels on both its institutional placement and retail offering. Raising HK$324.7 million ($41.74 million) in new money, the 88.26 million share deal represented 12% of the company's equity and was priced on Monday, with a 60%/40% split between institutional and retail investors.
"We instituted a clawback from the institutional book after the retail offering closed 82.9 times oversubscribed," says Goldman ECM official Richard Cormack. "This increased the retail offering from 10% to 40% of the total."
The institutional book closed 11 times oversubscribed including shares re-distributed from minority holders. Indeed, one of the most unusual aspects of the deal was the simultaneous launch of an IPO, alongside a distribution and re-distribution of shares - in this case those of Legend Holdings, from which Digital was being spun-off.
Existing holders of Legend stock were offered one Digital share for every ten held and 52% accepted, taking up 168.47 million shares of the 327.84 million on offer. The remaining 159.36 million shares were then incorporated into the placement tranche.
The deal was priced at HK$3.68 at the top of its indicative range, on a price/earnings ratio of 17 times 2002 earnings. There is also a 13.24 million greenshoe. Syndicate members include co-leads BOCI Asia, Casenove and Merrill Lynch.
The deal was said to mainly appeal to China funds and existing holders of Legend stock. Geographical distribution saw a 60% allocation to Asia, with Europe taking 14% and the US 12%. The balance comprises the 13.5% distribution to retail (taking into the account the re-distributed shares).
Pending the exercise of the greenshoe, Legend's parent, the Chinese Academy of Sciences, has seen its stake diluted from 57% to 50.1%. The main purpose of the flotation was to remove a conflict of interest between Legend, which manufactures and distributes own-brand computers and Digital, the company's foreign brand distribution unit.
One of the key selling points underpinning the deal was the strong sales growth being registered on the Mainland, which has remained relatively insulated from the global economic slowdown. The company has said that it hopes to achieve a minimum 20% sales growth per annum over the coming years.
For the first nine months through to December 2000, it had matched its overall sales figure for 2000 of HK$6.4 billion ($820.5 million).