Follow-ons gather pace in Asia
Equities Nine deals raise about US$2.8bn over the past weekBY FIONA LAU, CANDY CHANFollow-on offerings in Asia
Pacific surged to about US$2.8bn
last week as companies and
major shareholders tapped the
markets for funds to withstand
the coronavirus crisis.
After a month of extreme
sell-offs, Asian markets regained
some stability with the S&P/
ASX 200 closing the week 4.65%
higher while both the Hang Seng
index and the Korea SE Kospi 200
slid a modest 0.9%.
Riding the market rebound,
nine companies or their
shareholders rushed to raise
funds.
More than half of the deals
were from Australasia, where
Wesfarmers completed the
biggest deal of the week with a
A$1.07bn (US$651m) block trade
in supermarkets operator COLES
GROUP. New Zealand specialist
outdoor gear retailer KATHMANDU
HOLDINGS, Australian online travel
agency WEBJET, student placement
and testing firm IDP EDUCATION and
data centre operator NEXTDC also
launched respective placements
and/or entitlement offers of
NZ$207m (US$123m), A$346m,
A$225m and A$672m.
In South Korea, Singapore’s
sovereign wealth fund Temasek
Holdings raised a combined
W619bn (US$504m) from blocks
in drugmaker CELLTRION and its
affiliate CELLTRION HEALTHCARE.
In Hong Kong, the parent
company of WUXI BIOLOGICS (CAYMAN)
raised HK$4.6bn (US$599m) from
a sell-down and GEM-listed Viva
China raised HK$1.5bn from
a block in Chinese sportswear
company LI NING.
The deals highlight the depth
of liquidity available for follow-
ons in the region but bankers
generally believe that the market
has yet to reopen fully and see
little demand for growth capital.
“I think the vast majority
will be primary issuance which
is balance sheet-related. The
secondary sales will tend to be
those that are in distress eitherbecause of margin against the
security, or the entity at stake is
in need of cash,” said Aaron Arth,
head of the financing group for
Asia ex-Japan at Goldman Sachs.SUPERMARKET SALE
Wesfarmers was certainly
looking to shore up its balance
sheet at a difficult time. The
Australian conglomerate
launched the Coles sale after
last Monday’s close, riding on
a 6.9% jump in the stock and a
7% surge in the local S&P ASX
200 index. Wesfarmers had
already raised A$1.05bn from a
sell-down in Coles on February
18, but had made a point at the
time of keeping a stake of more
than 10% to keep the right to
nominate a director.
Rob Scott, Wesfarmers
managing director, said the past
few weeks have highlighted the
importance of balance sheet
flexibility.
Coles shares have fared better
than the broader market as
stockpiling of necessities and
increased consumption of food at
home underscore the defensive
quality of supermarket operators.
The stock fell 4.3% from
February 1 to March 31 while the
S&P ASX 200 index plunged 28%
over the same period.Sell-downs in Li Ning, WuXi
Biologics and the Celltrion duo
were similar stories as investors
sought defensive stocks.
“The blocks were all from the
healthcare and retail sectors.
Investors believe these stocks
can weather the storm better
while shareholders are grabbing
the chance to cash in before the
shares go lower again,” said a
syndicate banker.
Before the deal launched,
Celltrion’s stock was up 9.4%
this year after rallying 30% since
March 23, when it said it was
accelerating development of an
antiviral treatment for Covid-19.LIFE OR DEATH
Some companies, on the other
hand, need cash to survive.
Webjet, whose business was
severely hit by travel restrictions
worldwide, raised funds to cover
operational costs and capital
spending until year-end. Its shares
have plummeted 71% this year
as of last Thursday. Alongside the
fundraising, Webjet is deferring
its first-half dividend, slashing its
workforce and cutting board and
executive pay by 60%.
IDP Education is also using
the funds raised to strengthen
its balance sheet and financial
flexibility as its main businesses- English-language testing for
certifications such as IELTS and
international student placements - have been affected by travel
restrictions and government-
mandated lockdowns worldwide,
including in India, IDP’s largest
testing market.
A weak Australian dollar
helped the transactions as
foreign investors looked for
deeply discounted assets. The
currency touched a 17-year low
of US$0.55 on March 19. After
rebounding, it dipped below
US$0.61 again last week.
US private equity firm Bain
Capital, for example, bought a
6% stake via Webjet’s placement.
It has also committed to sub-
underwrite the retail tranche of
the entitlement offer, equal to a
further 10% of the company.
“At turbulent times the
market can be opportunistic,
not only for issuers but also
investors. Investors look for
wider discounts to the already
severely hit share prices, but
they should be ready to absorb
the risks as it is not the same
situation as before Covid-19,”
said an ECM banker. “Whichever
way you approach the market,
both parties have to act very
quickly as the window could be
really short.”
News
6 International Financing Review Asia April 4 2020B 1 HZVLQGG