Wintek and Farglory sell $540 million of GDRs

Two Taiwanese companies have raised a combined $540.9 million from the sale of global depositary receipts (GDRs), taking advantage of the short issuance window before the Lunar New Year holiday in early February. Filings for both deals were made in December, meaning investors were expecting a trade at some point and getting them out of the way this early would prevent an overhang on the share price.

The largest of the two and also the first to price was Wintek Corp, a manufacturer of small and medium-size liquid crystal display (LCD) screens for mobile phones, digital cameras and MP3 players among other things, which closed its $330.6 million transaction on Wednesday night. The deal was launched after the Taiwan market closed on that same day and completed through an accelerated bookbuilding, although the company had met investors during an earlier non-deal roadshow so the deal didn’t come entirely without marketing. Morgan Stanley was the sole bookrunner.

Wintek’s quick trade meant it was able to squeeze in ahead of Farglory Land Development, Taiwan’s largest property developer, which chose to do a concurrent three-day roadshow and bookbuilding. The $210.3 million deal was launched on Tuesday and priced last night with Credit Suisse acting as the sole bookrunner. A source said the fact that there was a second Taiwan deal in the market at the same time didn’t have any noticeable impact on the demand. Indeed, several investors participated in both transactions and, if anything, the 0.97% rise in Wintek’s share price yesterday after the deal, made some investors more confident in buying Farglory.

The Wintek transaction saw good momentum from launch and the deal was covered within an hour, according to sources. The fact that the company is a market leader in its industry -- among other contracts it is a supplier of touch panels for Apple’s iPhone and iPad -- and a highly liquid stock would have helped attract investors to the offering. The deal accounted for close to 20% of the existing market cap, but only about three days’ worth of trading based on the turnover in the past month. Wintek is also a familiar name for equity investors, as it has issued several GDRs in the past 10 years. The most recent transaction was in April last year when it raised $122 million from a deal arranged by J.P. Morgan.

The current transaction, which is the largest follow-on by an Asian company so far this year, comprised a base offering of 30 million GDRs with an option to upsize by another 10 million. Since the deal was multiple times covered, the option was utilised in full resulting in a final deal size of 40 million GDRs. Each GDR is equal to five common shares traded in Taiwan.

Since the deal launched and priced while the market was closed, it was offered with a price range that translated into a 3% to 7% discount versus Wednesday’s close. According to sources, the price was fixed at $8.264 per GDR, which equalled a price of NT$48.93 per share, or a 5% discount versus Wednesday’s close of NT$51.50.

Before the deal, Wintek had gained 2.8% this year. But it has also had an impressive rally since June last year, adding 150%. This didn’t seem to scare off potential buyers, however, as more than 70 investors bought into the deal, including existing shareholders, hedge funds and long-only accounts. The majority of the demand came from Asia, followed by Europe and the US.

As is often the case when Taiwanese companies are raising fresh equity capital, the proceeds will be used to purchase raw materials.

As a non-tech company, Farglory offered investors a chance to diversify their Taiwan exposure into a sector that is not particularly well-known outside the domestic market. In fact, this is the first ever GDR issued by a Taiwan real estate company. However, Farglory said it intends to use the money raised to expand into mainland China, which gave the offering a more familiar angle.

The sale encountered a further challenge when the Taipei city government announced on Wednesday that it will introduce a luxury property tax in July, suggesting a general tax on luxury properties across Taiwan may not be too far off. However, the deal got done and while some investors were price sensitive, the bookrunner was able to push the discount to 7.9%, well inside the maximum 10%. As the stock was trading during the three-day bookbuilding, this deal was not marketed with a price range, but investors indicated their preferred discount versus the underlying common shares.

Farglory sold 43 million GDRs, of which 33.5 million were new and 10.5 million were based on existing shares offloaded by the chairman. In the filing with Taiwan regulators, the company had indicated it may sell up to 50 million GDRs, split between 31 million to 38 million new GDRs and 11 million to 13 million existing ones. Each GDR accounts for two common shares. The chairman supposedly chose to sell the lowest possible amount of GDRs as he didn’t want to part with any more paper at the final price.

The deal, which accounted for about 13% of the enlarged share capital and some 40 days’ worth of trading, was priced at $4.8906 per GDR, which translated into NT$71 per common share and a 7.9% discount versus yesterday’s close of NT$77.10. However, the fact that the share price fell 3.1% yesterday may have made investors a bit more amenable to accepting a tighter discount.

The share price has climbed close to 30% from a low just below NT$60 in June.

Again, most of the demand came from Asia-based accounts, which was perhaps to be expected since the three-day roadshow focused entirely on Asia. However, there was some participation from Europe as well. The number of investors was smaller than for Wintek, at close to 30. Still, a source referred to the deal as being “comfortably covered.”