Tsingtao shareholder pockets $193 million from block trade

The second-biggest shareholder in Tsingtao Brewery last night raised HK$1.5 billion ($193 million) from a block trade that became the first Asian equity transaction to hit the market after the elections in Greece. Many issuers and investors have been sidelined ahead of the election because of concerns that markets would take another dive if the anti-austerity Syriza party was returned to power.

That didn’t happen. However, while Asian markets finished higher amid hopes that the winning New Democracy party will be able to form a coalition government that can push through the austerity measures needed to eventually get Greece out of its current mess, European markets started to ease off shortly after opening as concerns about Spain resurfaced again. Several indices, including London’s FTSE 100, hovered between gains and losses for the rest of the session, weighed down primarily by banks after 10-year Spanish bond yields rose above 7%.

The FTSE finished up 0.2%, but the weaker tone meant the initial appetite for the Tsingtao deal waned a bit as the evening progressed. US markets also opened down about 30 minutes before the order books closed.

On the other hand, the deal came just three trading days after shares in Hong Kong-listed Tsingtao hit an all-time high, making this a good time to take profit.

The seller, an individual investor and entrepreneur named Chen Fa Shu, offered 32 million H-shares at a price between HK$47 and HK$48.55, which translated into a discount of 4% to 7% versus yesterday’s closing price of HK$50.55.

The discount was viewed to be pretty wide, but a source said this was probably deemed necessary given that the share price has risen about 26% from this year’s low point in early February. Yesterday’s close was only 1.1% below the record high of HK$51.10 from last Wednesday.

And given that the deal size accounted for about 25 days of trading based on the daily average volumes during the past three months, perhaps 7% wasn’t too excessive. Either way, the price was fixed at the bottom of the range for the maximum discount.

According to Bloomberg data, the deal accounted for about 4.9% of Tsingtao’s H-share capital and just over one-third of Chen’s stake in the Chinese beer manufacturer. His remaining stake of about 9.1% will be locked up for 180 days. That is quite long following a block trade, but one source said Chen agreed to it because he has no intention of selling any more shares in the company any time soon. Supposedly he wanted to raise some cash for another investment.

There was little information last night about who bought into the deal, but one source noted that it was reasonably well covered. Most of the orders came from Asia, which wasn’t too surprising in light of the weakness in European markets. However, some US investors also took part, although in smaller sizes.

Analysts are generally positive about Tsingtao with 12 “buys” and six “holds” on the stock versus six “sell” recommendations, Bloomberg data show. However, it appears a number of analysts may not have updated their recommendations following the latest gains as the average target price is HK$46.29 — some 4.3% below yesterday’s closing price.

Earlier this month, Tsingtao said that it has agreed to team up with Japanese beverage maker Suntory Holdings to produce and distribute beer in Shanghai and the neighbouring Jiangsu province with the aim of boosting their competitiveness. Tsingtao and Suntory, which is perhaps best known for its high-quality single malt whisky, will each inject their existing beer assets in these areas into two 50-50 joint ventures, focusing on production and distribution respectively.

J.P. Morgan was the sole bookrunner for the block trade.