Khazanah Nasional sold M$1.2 billion ($289 million) of shares in power distributor Tenaga Nasional through a discounted block trade late Thursday, the latest transaction under the state fund’s strategy of selling Malaysian stocks to increase liquidity.
Tenaga is one of Khazanah’s most frequent selldown targets. It has sold shares every year since 2012, raising about $1.5 billion through five transactions, including four aftermarket block deals and a $500 million bond, exchangeable into Tenaga shares, in 2014.
Its stake in Tenaga has dropped to 28% after Thursday’s deal from 35% five years ago.
The deal was a boon for joint leads CIMB and especially Macquarie. The Australian bank has now muscled its way into the pack of big-name international banks to have managed transactions for Khazanah — which has increasingly become a key source of investment banking revenues in the country.
Search for business
Building business relationships with the Malaysian state fund has become increasingly important to foreign investment banks over the last few years amid a drought of activity in the country’s equity market.
As it struggles with low oil prices and a sharply depreciating currency, Malaysia has seen as much as M$22.3 billion ($5.5 billion) of foreign capital pulled out of local stocks in 2014 and 2015, according to Bursa Malaysia, the Kuala Lumpur stock exchange.
Meanwhile, a political scandal involving Prime Minister Najib Razak — also the finance minister — and another state fund, 1Malaysia Development Berhad (better known as 1MDB) continues to weigh on foreign investor sentiment.
Stock trading volume plunged and equity market activities have been largely muted since the stellar years of 2012 and 2013, when the country saw a number of big deals including Felda Global Ventures, IHH Healthcare and Westports.
Against this backdrop, Khazanah has been one of the few dealmakers in the equity market. The reason is simple: it has been tasked with boosting stock market liquidity by selling part of its shareholding in a number of Kuala Lumpur-listed companies.
Apart from Tenaga, Khazanah has also sold stakes in IHH Healthcare, Westports and Malaysian Airports.
Just how competitive the business is can be seen by Khazanah’s choice of syndicate banks. Apart from home-grown CIMB, which has been involved in most of Khazanah’s previous deals, the state fund has partnered with Deutsche Bank, Credit Suisee, Standard Chartered, Bank of America Merrill Lynch, JP Morgan and Nomura for these transactions.
It has now added Macquarie to the list, which together with CIMB arranged the sale of 82 million Tenaga shares on Thursday. Similar to previous Khazanah deals, the shares were sold at a very tight discount of 1.8%, or M$14.3 per share, after being marketed at a range of M$14.30 to M$14.56 at launch.
Sources said the order book was well-covered and comprised of about 30 different accounts. Like other Malaysian deals, the majority of the demand was from government pension funds and domestic accounts, while two prominent international long-only investors and a number of multi-strategy funds also received allocations.
Final allocations were heavily skewed towards the top six accounts, which took about 70% of the entire deal.
On the investment front, Khazanah appears to be switching its targets from public companies to private firms and start-ups.
Earlier this year it participated in the $170 million private funding of Garena Interactive, Southeast Asia’s largest internet startup. It has also invested in Alibaba’s logistic affiliate Cainiao and Hong Kong-based peer-to-peer lending platform WeLab.
