International Financing Review March 7 2020 77EQUITIES
China 78 India 79 Malaysia 80 Singapore 80 Denmark 80 France 80 Germany 81 Italy 81
Sweden 82 Switzerland 82 UK 82 United States 83 Brazil 86 FRONT STORY ASIA-PACIFICChina property spin-offs gather pace
Construction deals to follow successful management company listings
Following a wave of property management
spin-offs in recent years, Chinese real estate
developers are now beginning to monetise
their construction businesses.
GREENTOWN MANAGEMENT, the project
management arm of Hong Kong-listed
Greentown China, is planning a US$250m Hong
Kong IPO this year while Agile Group is looking
to spin off its construction management unit
AGILE CITY to raise about US$300m–$400m.
"OTHûCOMPANIESûWEREûAMONGûTHEûlRSTû
batch of property developers to spin off
their property management units a few
years ago before it became a trend. Listing
the construction arms may now become the
new fashion in the sector.
“For Chinese property developers,
spinning off assets is always on the agenda.
Some of them simply need the money while
some are trying to realise the business’s
value after it has grown to a certain size,”
said a banker on one of the deals.“After all, property sales could be volatile
given the economic cycle and the Chinese
government’s ever-changing policies over
the sector. It’s always good if the units, as
listed entities, can fund their future
development through equity or debt.”
Agile listed property management unit
A-Living Services in February 2018 at
HK$12.30 per share. The stock has more than
tripled in value to HK$37.40 last Thursday.
This had made A-Living more valuable
than Agile Group itself, with respective
market capitalisations of HK$49.8bn and
(+BN ûEVENûTHOUGHû!
,IVINGSûûlRST
HALFûPROlTûWASûJUSTûABOUTûONE
TENTHûOFûTHATû
of Agile (Rmb568m vs Rmb5.9bn).
Greentown Service Group, a sister
company of Greentown China, was listed in
Hong Kong in July 2016. Shares of the
property management company closed at
(+ûLASTû4HURSDAY ûMOREûTHANûlVEû
times the IPO price of HK$1.99.CONSTRUCTION ARMS
'REENTOWNû-ANAGEMENT ûWHICHûlLEDûAû
listing application on February 28,
undertakes property construction and
project management for developers. The
property owners are responsible for the
acquisition cost of land and the construction
cost of property.
Agile City, meanwhile, offers EPC
(engineering, procurement, construction),
landscaping and home decoration services
to Agile and other developers.
Credit Suisse and Deutsche Bank are the
sponsors.
Agile City kicked off preparations last
month with HSBC and JP Morgan for an IPO,
which could come this year.
According to Agile’s 2019 interim report, its
construction business has undertaken over 300
projects, providing services to over 30 corporate
customers in China’s real estate industry.
Fiona LauGFL raises US$2.2bn from recycled IPO and MCB
Waste manager concedes on price but still drops on debut
GFL ENVIRONMENTAL succeeded in going public at
the second attempt with a dual-tranche
US$2.2bn IPO and mandatory convertible
offering, but the sponsor-backed Canadian waste
MANAGEMENTûlRMûHADûTOûOVERCOMEûDIFlCULTû
market conditions and cut the price to do so.
In one of the biggest Canadian IPOs of all
time, Toronto-based GFL was able to
consummate its NYSE/TSX listing by selling a
modestly upsized 75m shares (98% primary,
2% secondary) at US$19, below the US$20–
$21 marketing range.
The company separately raised US$775m
from the sale of a mandatory convertible
bond, structured as three-year tangible equity
units.
Having already unsuccessfully pitched to
investors in November, GFL accelerated the
timetable of its latest IPO attempt by one
day.
This allowed it to take advantage of a
mEETINGûEARLY
WEEKûMARKETûREBOUNDûTOûPRICEû
the deal on Monday night, instead of late
Tuesday as originally planned.The market cap is US$6.2bn, with about
US$4.2bn of net debt versus the company’s run-
rate pro forma adjusted Ebitda of about US$1bn.
Debuting on the NYSE on Tuesday, GFL still
stumbled, falling as much as 11.8% to US$16.75
ONûTHINûVOLUMESûBEFOREûlNISHINGûITSûlRSTû
session at US$16.80, an 11.6% day-one loss.
The stock remained well below the
offering price through early Friday.
JP Morgan, BMO Capital Markets, Goldman
Sachs, RBC Capital Markets and Scotiabank drew
two times oversubscription, light by the
standards of the US IPO market.
Demand was tight with the top 10 accounts
taking 60% of the stock and the top 20 95%.
There was little room for failure,
particularly as GFL is highly acquisitive and
may need ongoing access to public markets
to fund its growth.
Despite bankers initially telling accounts
that GFL’s sponsor BC Partners would not
budge on price, they ultimately relented as
investors questioned the company’s debt
load and over-reliance on acquisitions.These reservations also surfaced during
November’s roadshow though GFL tried to
address them by highlighting high single-
digit organic growth and touting post-IPO
leverage of around four times net debt/
Ebitda, lower than the number it had
marketed previously.
The strong performance of GFL’s comp set,
including Waste Management, Republic
Services and Waste Connections, encouraged
the company to re-launch the IPO, though
the stock prices of these comps slid with the
rest of the market during the marketing
period.
The MCB priced at a 6% dividend and
20% conversion premium, the mid-points of
talk.
About 40% of the offering went to the top
four accounts, another banker close to the
deal said.
The MCB fared better than the common
but still fell 6.2% to US$46.90 (versus US$50
PARûPRICING ûINûITSûlRSTûSESSION
Anthony Hughes10 IFR Equities and SE 2323 p 77 - 87 .indd 77 06 / 03 / 2020 19 : 36 : 29