BEST EQUITY-LINKED DEAL
SoftBank Group Corp $6.6bn mandatory exchangeable trust securities due 2019
Joint bookrunners: Deutsche Bank and Morgan Stanley
The past year has been one of scant supply in Asia’s equity-linked market. So when SoftBank Group turned up with the largest equity-linked deal globally since 2010 in a structure not often seen in the region, it attracted huge interest.
The deal was the first equity-linked transaction to involve Alibaba Group stock and used a mandatory exchangeable trust securities (Mets) structure, which helped bridge the gap between the Japanese issuer and US-listed shares. And at the same time it pulled in investors. For all these reasons, the $6.6bn issue is GlobalCapital Asia’s Best Equity-Linked Deal of 2016.
SoftBank was weighed down by a rising amount of debt and was under pressure to monetise some of its $65bn position in Alibaba Group to deal with the problem. But the Japanese company is not registered with the US Securities and Exchange Commission and so couldn’t simply offload some stock onto the market.
The leads began working on a Mets structure with SoftBank’s in-house finance team some four months before the launch, part of which included convincing chairman Masayoshi Son of the format.
The three year trust securities, part of an $8.9bn sell-down of Alibaba stock, allowed SoftBank to jump the SEC hurdle by automatically exchanging into Alibaba’s American Depository Shares (ADSs) at maturity.
Alibaba was naturally concerned with the impact a multi-billion-dollar sale of its shares could have on its stock price. But the structure cushions the effect on Alibaba’s stock, as the company’s share price at the Mets maturity will determine how many ADSs each trust securities exchanges into.
Meanwhile, on top of a 17.5% conversion premium, investors are paid a healthy 5.75% coupon. So the deal drew the whole gamut of investors from traditional equity buyers to specialist equity-linked funds. As a result, the leads executed the sale of 55 trust securities in 24 hours and a day later exercised the $1.1bn greenshoe. The success of the deal has laid the groundwork for the use of more Mets structures in Asia.
BEST IPO
Samsung BioLogics Co W2.25tr ($1.9bn) IPO
Joint lead managers: Citi, Credit Suisse, JP Morgan, Korea Investment & Securities and NH Investment & Securities
A reliance on cornerstone investors has characterised IPOs this year, more often than not in a bad light. Certainly the largest deals were defined by the portions signed over to cornerstones. And the bigger the transaction the more noticeable it was. For example, some bankers working on Postal Savings Bank of China Co’s Hong Kong listing called it “the largest club deal in the world”.
So, Samsung BioLogics Co’s W2.25tr deal stands out from the crowd, not only being the second largest IPO in Asia Pacific ex-Japan this year and the largest in Korea for three years, but for being completed without cornerstone investors.
BioLogics was after a large sum of money but had not posted a profit since it was founded in 2011. But the firm is the jewel in Samsung Group’s crown and in two or three years is expected to be perhaps the dominant player in the multi-billion-dollar global biopharmaceutical manufacturer market. So, in February it started asking banks how it could raise money.
Fast forward to the last week of October and BioLogics priced its IPO at the top end of the W113,000-W136,000 guidance range, multiple times subscribed, with a bulging book of high quality demand. The team of bookrunners had managed to sell the company using a 2021 price-to-earnings multiple and the story of its future as a contracted manufacturing organisation (CMO).
But BioLogics’ most striking success and perhaps most deserving reason for best IPO was its aftermarket performance. Debuting the day after Donald Trump took the White House, BioLogics’ stock price had a minor blip and then proceeded to climb 16.1% over the next two weeks to November 25.
It came in contrast to a long list of headline IPOs this year in Asia, which flopped after listing — from BOC Aviation, which priced its HK$8.7bn IPO at HK$42 per share and dropped to HK$39.35 apiece after its first month, to Postal Savings Bank’s HK$57.6bn mammoth, which debuted at HK$4.76 per share on September 27 and had hit HK$4.16 by October 28.
For its execution, the returns it bagged for the issuer and its aftermarket trading, Samsung BioLogics deserves the title of Best IPO this year.
BEST FOLLOW-ON/ACCELERATED BOOKBUILD
Mapletree Commercial Trust
S$1.04bn ($732.16m) placement and preferential offering
Joint global co-ordinators, joint bookrunners and joint lead managers: DBS, Goldman Sachs and HSBC
Real estate investment trusts may be safe as houses, but Mapletree Commercial Trust still managed to shake things up when it sealed an overnight block-plus-rights combo to raise S$1.04bn in July.
The issuer made the unique decision to simultaneously launch a S$529.1m placement and S$515.2m preferential offering, aiming to use the proceeds for its S$1.8bn acquisition of office and business parks from its sponsor.
In an effort to capture different pockets of liquidity and tap into latent demand from new and existing unitholders, the fundraising was structured in two tranches: one aimed at institutional investors via the overnight bookbuild, and the second at unitholders via the rights offering.
This was no mean feat given its size and pricing goals. Mapletree was looking to not only carry out one of the largest equity follow-ons for a Singapore Reit, but also increase its market capitalisation by a third and price at a discount the market considered aggressive.
The fundraising achieved those objectives thanks in large part to the tightly-executed dual tranche structure. Investors made a beeline amid a global hunt for yield and outperformance of Reits. The block-plus-rights combination, meanwhile, gave the leads the ability to create price tension between the different investor groups and maximise distribution.
The move paid off handsomely. The block was covered an hour into the launch and eventually 3.8x subscribed, with final demand exceeding S$2bn from over 100 accounts.
High quality investors – 80% of them long-only – crowded into the book, with the units distributed to Asia, US and Europe. Pricing ended up at the top of the S$1.41-S$1.45 a share range, translating into a razor thin discount of 1.4% on an adjusted basis. The rights offering, which was 1.5x covered, priced at S$1.42, a 3.5% discount.
BEST EQUITY HOUSE
Citi
In a year of upheaval for ECM and the franchises of global banks in Asia, Citi’s consistency has not only allowed it to maintain its market share, but also grow it. For that, the bank wins the award for Best Equity House.
The past year has been one of extreme headwinds for international banks in the region, with equities desks bearing the brunt of a plunge in volumes and investor capitulation. The role of global ECM houses has been called into question.
All that has not dented a franchise like Citi’s, whose breadth of products and ability to leverage both its corporate lending relationships and savvy advisory have helped it serve clients in good and bad times.
Citi may not be able to claim a chokehold on China, Asia’s most important market for equity issuance, but its broad footprint across the region means it does not have to be over-reliant on any one market to deliver the numbers.
And deliver it has. During the awards period, Citi not only maintained a leading position in the Asia ex-Japan ex-onshore China ECM bookrunner rankings, but also improved on it, according to Dealogic.
At a time when global banks are scaling back in Asia, Citi successfully clawed its way from 7th to 4th place on the league table, earning credit for $4.58bn worth of deals and a 4.4% market share, compared to a 3.6% share in the previous comparable period.
And although Asian banks have thrown down the gauntlet this year in ECM, with the Chinese lenders mounting an increasingly bloody campaign, Citi played to its strengths in southeast Asia, South Korea and India.
It topped the league table in India, a notoriously difficult market in which to make money, beating fierce competition from local rivals. It was also the top blocks house in South Korea, and in southeast Asia it has more than doubled its market share from the previous period, courtesy of its dominance in Reits.
That consistency is key to ensuring clients are engaged throughout all stages of the business cycle, and making sure the bank gets a seat at the table no matter how markets are doing.
There is no denying the strength of Citi’s commercial banking relationships and the opportunities it has mined from there – yet the bank has been over reliant on its big balance sheet.
Instead, what Citi has brought to the table is the ability to understand the client and marry their needs with succinct advice on structuring, timing and distribution, whether that should be in the form of an IPO, overnight block, rights issue or equity-linked offering.
The breadth of its offerings this year bears testimony to that. Citi navigated India’s maze of foreign ownership rules to help Sumitomo Mitsui Banking Corp sell down a $305m stake in Kotak Mahindra Bank. Citi also led the way for Chinese IPOs in the US, bringing deals such as ZTO Express, GDS Holdings and Gridsum Holding.
Special mention goes to Deutsche Bank, the most improved ECM house in Asia. After a couple of choppy years the bank has returned to form in ECM with a new leadership team and several marquee trades, the most notable being our Best Equity-Linked Deal – the $6.6bn mandatory exchangeable trust into Alibaba Group Holding.
Its ECM business leapt an impressive six spots to second place during the awards period among Asia ex-Japan ex-onshore China bookrunners, according to Dealogic. Deutsche was the only house in the top 10 to improve its league table credit by $1bn.
Whether it can sustain this performance remains to be seen, but Deutsche’s ambitions will be one to watch as its franchise is rebuilt in Asia.
But for showing consistency throughout market cycles and resilience in its franchise amid unwavering volatility, Citi is our choice for Best Equity House.