Wistron raises $223.5 million from relaunched GDR

Taiwanese laptop and LCD panel manufacturer Wistron returned to the market last night raising $223.5 million from a global depositary receipt (GDR) follow-on that it had pulled before pricing on Friday. The relaunched deal is the largest equity deal with an international component from Taiwan year-to-date -- although activity has been rather thin with only one other GDR so far.

Sources say the bookrunners had compiled sufficient demand to complete the deal on Friday, but the company wasn't happy with the price and chose to wait for a better opportunity. The deal was launched on the back of a NT$49.65 close in Wistron's Taiwan-listed stock on Thursday, but the stock tumbled 5.8% on Friday before the deal was completed -- according to sources the intention was always to keep the books open into Friday. The stock had also been on a slide from a 2009 high of NT$54.50 reached on June 1 and 2 as the broader market experienced a bit of a correction following a rally that had lasted for more than three months.

And it seems the management made the right call in terms of holding off, as they were able to achieve a higher price last night, allowing them to raise close to 8% more funds than if they had gone ahead at the end of last week.

However, there may be partly a technical explanation for that as investors who shorted the stock when they put in orders for the GDR at the end of last week were scrambling to cover these positions yesterday after they learnt that the deal had been called off. As a result, Wistron finished the session 6.95% higher yesterday, while the broader Taiwan market lost 3.5% as it followed other Asian markets lower for a second session in a row. Trading volume in the stock was close to twice as high as normal with about 52.6 million shares changing hands, compared with a three-month average of 27.7 million shares.

The fact that the deal reappeared yesterday evening would thus have taken at least a few investors by surprise. However, joint bookrunners Credit Suisse and J.P. Morgan had obviously stayed in contact with some potential buyers because the deal was relaunched at a fixed price, suggesting that they were confident that there would be demand at that level. In particular, one sizeable long-only fund had indicated its willingness to support the deal as an anchor investor at the price where it was relaunched.

The offering was slightly restructured versus last week in that the company now offered 12 million GDRs to start with, plus an upsize option of 3 million shares. When the deal was first launched on Thursday evening last week, the base size consisted of 15 million shares. As it were, demand was strong enough to exercise the upsize option straight away, meaning the two deals were identical except for the price. The final size accounted for about 9% of the enlarged share capital.

The GDRs were sold at a price of $14.90 each, which translates into NT$49 apiece for the underlying common shares in the Taiwan market. Each GDR accounts for 10 common shares. Based on yesterday's closing price in Taipei, the placement price resulted in a discount of no more than 2% -- a tight price on any day and definitely eye-catching on a day when the share price was up 8%.

Last week's offer was not done at a fixed price and, following a bookbuilding exercise, the source said the final price ended up at NT$45.50, or about $13.80 per GDR.

Despite the more expensive offering, other investors were happy to join the anchor investor, although the deal ended up being placed with quite a tight group of investors. According to the source, the GDRs were placed with a little over 10 accounts, most of which were international.

The company said it would use the money to acquire raw materials from overseas.