Philippine food and beverage company Universal Robina Corp last night raised Ps7.44 billion ($173 million) from the sale of part of the treasury stock held on its books. The deal, which was the first block trade in Asia since mid-May, attracted a lot of interest from international funds, allowing the upsize option to be exercised in full and the price to be fixed at the mid-point of the range.
Asian markets have remained sluggish this week, with some posting tentative gains against a backdrop of very thin volumes and others continuing to sell off. Weaker-than-expected retail sales data in the US overnight — sales fell to their worst level in two years — added to the overall caution, but mostly all eyes appear to be on the Greek elections on Sunday, which could mark the start of the country’s eventual exit from the eurozone and create a whole new mess for financial markets to deal with.
But the Philippine stock market has remained relatively well supported and Universal Robina itself jumped 7.3% on Monday. Despite a 1.3% pull-back yesterday the stock is currently trading only 4.3% below its all-time high of Ps68.05 that it reached in early May.
According to sources, the deal drew very strong participation from international long-only funds, with some additional demand from domestic accounts and hedge funds. It was supported by a few big anchor orders from high-quality long-only accounts, which helped attract other investors to the deal. The presence of anchors has become almost crucial to getting deals done in the challenging market environment that has dominated for the past few months as it reduces the risk for the bookrunners and tells investors that there is a high likelihood that the deal will go through. The risk is that it may be difficult to push up the price even if the incremental demand is strong. This transaction proves that this can be done as long as the discount range is not overly aggressive and takes into account that investors are asking for greater-than-normal compensation to protect themselves against sudden swings in the market.
Universal Robina initially offered to sell 100 million treasury shares, but with the option to sell a further 20 million shares in case of demand. And as noted, that option was exercised in full, resulting in a total deal size of 120 million shares, which translated into 5.8% of the company and about 40 days of trading volumes, based on the daily average in the past three months.
The shares were offered at a price between Ps61 and Ps63, which translated into a discount of 3.3% to 6.4% versus yesterday’s close. The price was fixed at Ps62 for a 4.8% discount.
According to one sources, about 30 investors participated in the transaction. The deal launched at about 6pm Hong Kong time, which is late for the Philippines where the stock market closes at 3.30pm, and stayed open until 10pm to allow US investors time to take a look at it. This supposedly yielded a few orders, but most of the demand was said to have come from Asia.
The timing of the deal may have been a bit of a surprise, given the current uncertainty about Greece which is keeping many investors on the sidelines, but the market was well aware that Universal Robina had treasury shares that it would be looking to sell at some point. Yesterday’s transaction accounted for more than two-thirds of its total stash, leaving the company holding 46 million treasury shares that represent a 2.2% stake. Based on yesterday’s closing price, those remaining shares are worth about $70 million.
Universal Robina told investors that the money raised will be used for potential acquisitions. No acquisition targets have been announced as yet, but given that it is raising money specifically for this purpose, it is bound to have something in mind.
Universal Robina, which is controlled by Philippine tycoon John Gokongwei, is one of the more liquid stocks in the Philippines, but historically it hasn’t been that widely held by foreign institutions. However, it has gradually come into favour during the past couple of years, which has helped its share price to multiply. A couple of years ago the stock was only trading at around Ps6, which means it has gained more than 10-fold since then.
CLSA was the sole bookrunner for the offering, which was not bid out to other investment banks.
