The Thai property fund of UK supermarket chain Tesco has fixed the price for its upcoming preferential public offering at Bt13.30 per unit and said on Friday that existing unitholders will be able to buy 0.3205 new units for every existing unit they own.
This will allow it to raise about Bt7.55 billion ($245 million), which is in line with earlier announcements. The fund, whose full name is Tesco Lotus Retail Growth Freehold and Leasehold Property Fund (TLGF), will use the proceeds to buy five shopping malls anchored by Tesco-Lotus hypermarkets from its sponsor.
“Following this public offering, TLGF will become Thailand’s largest property fund, with a total market value of more than Bt30 billion,” Somchai Boonnamsiri, CEO of Krung Thai Asset Management, the manager of the fund, said in a statement on Friday. “The investment in these new properties only eight months after the IPO reflects TLGF’s impressive growth potential,” he added.
The preferential offering, which is similar to a rights issue in other markets, will result in the issuance of about 567.3 million new units, or about 32% of the existing share capital.
Ek-Chai Distribution System, which owns 25% of TLGF, will take up its entitlement in full. Ek-Chai is controlled by UK-based Tesco and acts as the sponsor and property manager of the fund.
The offer price of Bt13.30 was set at the top of the indicated range following a bookbuilding exercise last week. However, investors who participated in the bookbuilding will get allocated only if the preferential offering isn’t fully subscribed by existing unitholders. The latter are able to apply for additional units on top of their proportional entitlements.
The subscription period for existing unitholders will start today and run until Thursday. In case there are any unsubscribed units, they will be allocated to investors who participated in the bookbuilding on November 30. The new units will start trading on December 11 if the offering is fully taken up by existing unitholders and on December 17 if part of the offering is allocated to new investors.
Existing unitholders have shown strong interest in the offering, while the order amount received by potential new investors during the bookbuilding was in excess of the deal size, the source noted.
Before the launch of the two-and-a-half-day bookbuilding exercise last Wednesday, the company set an indicative price range of Bt12.50 to Bt13.30, which translated into a discount of between 8.9% and 14.4% versus the previous day’s close of Bt14.60. The final offer price of Bt13.30 represents a 5% discount versus the closing price of Bt14 last Thursday. TLGF closed unchanged on Friday.
There was very good appetite for the stock during the bookbuilding, both from existing and new investors who welcomed the opportunity to build a meaningful position in the fund. TLGF is currently pretty illiquid with a daily average turnover of only $800,000, making that difficult to do in the open market, the source said.
Krung Thai Asset Management first announced the offering plan in early September. Unitholders approved the deal on October 5, and November 6 was the record date for determining which investors are entitled to participate in the offering.
The five malls that the fund plans to invest in are located in Phuket, Salaya, Nakornsrithammarat, Rangsit Nakornnayok and Bangpoo, according a September statement. At the time of the initial public offering in March, which raised $450 million from investors other than the sponsor, the property fund comprised 17 malls anchored by Tesco Lotus stores.
The new properties are expected to increase the fund’s dividend payouts and diversify its sources of income, the manager of the fund said in September. The new assets have proven track records and will start generating income for TLGF from the first day, resulting in no dilution for existing unitholders, it said.
TLGF’s unit price gained after the acquisition was announced on September 3, although it has come down a bit recently. As of last Friday, it was up about 35% from the IPO price of Bt10.40.
Tesco, which operates under the name Tesco Lotus in Thailand, has bought and developed more than 1,200 stores across the country, giving it a market share of 13%, according to the group’s website. It provides a stable offering of essential goods, including a variety of fresh food, groceries, electronics, leisure and entertainment and household products, as well as value-for-money apparel.
Bank of America Merrill Lynch is the sole global coordinator for the deal. CIMB, Citi and HSBC join the US bank as international bookrunners. Phatra Securities is the sole domestic bookrunner.
