The placement, which marked the largest block trade in Asia on record according to Dealogic, came just a couple of days after the Dutch provider of healthcare, lifestyle and technology products and services, said it would sell its entire 16.2% stake in the Taiwanese chip maker û valued at $8.5 billion at FridayÆs prices. YesterdayÆs sale, which was arranged by Goldman Sachs, will reduce that stake to 12.8%.
The transaction attracted strong interest among the domestic investment community and, according to a source, the deal was ôa good few times oversubscribedö with 15-20 insurance companies and financial institutions participating, depending on how you account for sub-funds. Most of them were already shareholders in TSMC.
ôPeople think there is juice left in the stock and with Philips exiting they also realise that this will be one of the last few opportunities to build up a big holding as the regular ADR offerings (which have been backed by Philips shares) may not happen any more,ö one observer says.
The sale comprised 887 million shares, which were sold at NT$65 apiece. This compared with a closing price of NT$67.20 after the stock gained 1.05% in yesterdayÆs trading. Market watchers said the positive market reaction despite news of the large sell-down was partly to do with the increased clarity of how Philips will dispose of its stake, but more importantly because of the $1.5 billion buyback programme that was announced by TSMC at the same time.
ôBuybacks are a good way to make use of the companyÆs cash flows,ö argues the observer.
Philips intends to participate in the buyback, which will take place this year and will see TSMC cancel all the shares it acquires. The company will also conduct further buybacks between 2008 and 2010, it said. Philips intends to participate in these too.
The placement discount was just below the maximum 3.5% discount that is allowed on a Taiwan block trade, but given the size of the deal this margin can still be considered reasonable. According to sources, Goldman Sachs had been sounding out potential institutional investors in the weeks leading up to Philips announcement to ensure there was a market for the shares.
The positive outlook for the stock is evident by the consensus target price of NT$78.49, which suggests another 17% upside from yesterdayÆs closing price. And those targets still donÆt reflect the buyback programs.
According to a statement issued Friday, Philips will also sell up to $2.5 billion worth of TSMC shares through an offer of American Depositary Shares during the course of this year. Market sources said yesterday the timing of that sale had yet to be decided but noted that it wasnÆt imminent.
Philips was a co-founder of TSMC back in 1987 with a 51% stake, which it has diluted over the years. A final sell-down had also been expected for some time after the Dutch company decided last year to exit the semiconductor business altogether to focus on other parts of its business.
In a statement yesterday, Philips said it will make a non-taxable profit of Ç725 million ($950 million) from the sale, which it will book in its first quarter results.
TSMCÆs quite volatile stock is marginally lower so far this year after falling 5.6% from a high of NT$71.20 in mid-January. However, it has risen 27% from its lows in July last year, compared with a 19% gain in TaiwanÆs benchmark index.
This sole-book deal will give Goldman a significant push up the Asia ex-Japan league tables where is currently lingering in seventh position, having arranged $1 billion worth of deals. UBS tops the list with $2 billion worth of league table credits.
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