IFR Asia - 28.07.2018

Pinduoduo highlights US appeal

„ Equities China-to-US listings still in focus as latest hit deal soars 41% on debut

BY FIONA LAU

PINDUODUO made a stellar debut

last week after its US$1.6bn

Nasdaq IPO, proving that the

US remains an attractive listing

venue for fast-growing Chinese

companies despite stepped-up

competition from Hong Kong.

The shares of the Chinese

online group discounter soared

as much as 44% over the IPO

price of US$19 when trading

started last Thursday, before

closing at US$26.70 for a 41%

gain.

The massive gain gave

investors food for thought

after Hong Kong lured the

HK$42.6bn (US$5.4bn) IPO of

Chinese smartphone maker

Xiaomi and the US$4bn-plus

listing of online food delivery-

to-ticketing services provider

Meituan Dianping with the

introduction in April of new

listing rules to attract Chinese

technology and biotech firms.

The enthusiastic reception for

loss-making Pinduoduo, which

was founded only in 2015 by

former Google engineer Colin

Huang, has shown how the

US market can reward a fast-

growing Chinese startup.

“Investors believe Pinduoduo

can keep up its tremendous

growth. The support of existing

shareholders for the IPO also

helped boost confidence,” said a

person close to the deal.

Pinduoduo’s revenue soared

to Rmb1.38bn (US$208m) in

the first quarter of 2018 from

Rmb37m a year previously.

Losses remained broadly

steady at Rmb201m versus

Rmb207.7m a year earlier.

Existing shareholders

Tencent Holdings and Sequoia

Capital had indicated an

interest in purchasing up to

US$250m each in the IPO but

were eventually allocated just

US$150m each.

The books were about 20x

covered, said another person

close to the deal.

“The company could have

set the price higher given the

strong demand, but decided to

leave something on the table

to secure a decent aftermarket

performance,” said the person.

Pinduoduo sold 85.6m

American depositary shares,

or about 6.8% of the enlarged

share capital, at the top of

the US$16–$19 price range. At

the final price, the company

was valued at about US$24bn,

compared to a US$15bn

valuation in April.

MORE TO COME

Pinduoduo is one of the largest

Chinese listings in the US this

KKR targets record Taiwan LBO

„ Loans Goldman Sachs underwrites US$1bn LCY loan in KKR’s first Taiwanese buyout

BY EVELYNN LIN

KKR is to borrow around

US$1bn to support its leveraged

buyout of Taipei-listed specialty

chemicals producer LCY

CHEMICAL, braving a challenging

regulatory environment that

has curbed private equity

dealmaking to date.

The NT$47.8bn (US$1.56bn)

buyout of LCY Chemical is

set to be the largest private

equity-backed acquisition

in Taiwan. KKR is heading

a consortium of investors,

including employees and

family members.

Goldman Sachs is underwriting

and arranging the debt

financing, and Taiwan’s liquid

banks are awaiting news of any

syndication with interest, given

the country’s previous lack of

buyout loans.

The island’s leveraged

finance industry is littered

with failed deals due to lengthy

review periods and scrutiny

from multiple regulators.

“There has been little global

private equity interest in

Taiwan over the past couple

of years,” a Taipei-based senior

loans banker said.

KKR last attempted a

buyout in Taiwan in April

2011, but local regulators

blocked its US$1.6bn bid to

take electronic component

manufacturer Yageo private,

citing insufficient protection

of minority shareholder rights,

among other reasons.

A NT$31.1bn debt package

was syndicated in May that year

and raised an oversubscription

that allowed joint bookrunners

and underwriters UBS and

Nomura to cut pricing on the

deal through a reverse flex.

Despite cutting the margin

by 30bp to 220bp over the

secondary CP rate, nearly 20

banks joined the financing, but

Taiwanese regulators rejected

the buyout after lengthy

reviews in June 2011.

“Our government was

not in favour of global PE

firms’ buyouts of high-profile

companies in the past as they

were concerned about the

foreign investors’ long term

operational commitment and

the investment’s impact on

competition within the sector,”

a second loan banker from a

Taiwanese state-owned bank

said.

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