FRONT STORY CHINA
ESR braves trade war jitters
Bigger test comes with Budweiser float later this month
Warburg Pincus-backed logistics property
developer ESR CAYMAN started bookbuilding
last week for what could be the largest Hong
Kong IPO so far this year, despite increased
trade war-related market volatility.
Ominously, the launch of the HK$9.76bn
(US$1.24bn) deal was delayed by two days to
Wednesday after the US unexpectedly
initiated a new trade dispute with Mexico at
the end of the previous week.
The Dow Jones Industrial Average plunged
354 points, or 1.41%, on May 30 after US
President Donald Trump threatened to impose
a 5% tariff on all Mexican imports to pressure
the country to do more to stop illegal
immigration into the US.
In light of the increased market volatility,
ESR has lowered its valuation target from
US$5.8bn–$6.2bn to US$5.6bn–$6.0bn.
“A lower valuation is likely to help
generate stronger demand from long-only
investors,” said a person close to the deal.
The ESR IPO, comprising about 561m
shares (58% primary/42% secondary), is
being marketed in an indicative range of
HK$16.20–$17.40 per share.
The range represents a 2020 forecast P/E
of 16.7–17.9 and a 2020 forecast EV/Ebitda of
14.3–15.0. ASX-listed larger rival Goodman
Group trades at a 2020 forecast P/E of 22 and
a 2020 forecast EV/Ebitda of 20.
Similar to many other recent Hong Kong IPOs,
ESR has included a downward price adjustment
in its prospectus, which gives it more pricing
mEXIBILITYûUNDERûCHOPPYûMARKETûCONDITIONS
Under the arrangement, the company can
price the deal up to 10% below the bottom of
the price range at HK$14.58 per share.
ESR manages a range of funds and vehicles
that invest in logistics properties across APAC.BIGGER TEST
Despite the challenging environment, Chinese
drugmaker HANSOH PHARMACEUTICAL GROUP last
week managed to price its HK$7.86bn (US$1bn)
Hong Kong IPO at the top of the indicative price
range on strong demand.
“Investors are still looking at IPOs but
they are very cautious and picky,” said a
banker on the deal. “Chinese healthcare
companies are less affected by the trade war
and are in one of the sectors that global
investors are still interested in.”
A bigger test will come when BUDWEISER
BREWING COMPANY APAC ûTHEû!SIA
0ACIlCû
business of Anheuser-Busch InBev, brings its
mega Hong Kong IPO to the market later this
month.The company aims to seek listing
APPROVALûONû*UNEûûFORûAûmOATûOFûABOUTû
US$5bn–$7bn, people close to the deal have
said. Listing is expected in July.
AB InBev said in May that it planned to list
a minority stake, and cautioned that the
deal would depend on valuation and market
conditions, among other factors.
“The company is one of the market
leaders and investors still like consumption
stories in China. Investors will be keen to
look at the deal but whether it will be able
to attract demand of this size in such
markets depends largely on valuation,” said
a banker away from the deal.
JP Morgan and Morgan Stanley are the joint
sponsors of Budweiser’s listing. The duo are
also joint global coordinators with Bank of
America Merrill Lynch and Deutsche Bank.
Seven shareholders are selling shares in the
ESR IPO, including WP OCIM, Goldman Sachs
Investments, APG-Stichting, General Electric
Pension Trust and Jingdong Logistics Group.
The deal is scheduled to be priced on June
12 and the stock to start trading on June 20.
CLSA and Deutsche Bank are sponsors, and
joint global coordinators with Citigroup,
Credit Suisse, DBS and Goldman Sachs.
Fiona LauOkea extends IPO and looks at lower price
Brent crude and shares in peer Aker fell during bookbuild
Norway’s OKEA has extended bookbuilding by a
week for its Oslo IPO and is testing a restructured
deal with pricing below the original price range.
Okea acquires and operates underdeveloped
OILûlELDSûONûTHEû.ORWEGIANûCONTINENTALûSHELFû
and launched bookbuilding for a NKr755m-
.+RMû53M
M ûmOATûONû-AYû û
with the deal expected to wrap up on Thursday.
The price range was NKr25-NKr33, with
Okea offering 26m shares and 4.18m
secondary shares from three shareholders:
Okea Holdings, Kebs and Skjefstad Vestre.
6OLATILITYûWASûBLAMEDûFORûDIFlCULTIESûINû
getting the original deal over the line, although
it is fair to say that market conditions were just
as tough when the deal launched and the VIX
volatility index fell for the large part of Okea’s
bookbuild. The company said a “strong
downward spike in the oil price” was more
SIGNIlCANT ûHOWEVER ûWITHû"RENTûCRUDEûPRICESû
dropping approximately 13.5% over the period.
In addition, key peer Aker’s shares
dropped more than 5% during the bookbuild.
Okea corralled “good subscription” for stock
within the price range, but not enough to
complete the deal. Typically, bankers like book
coverage of at least twice the stock offered to
allocate sensibly and trade positively in the
aftermarket. There had been no messaging on
book coverage throughout bookbuilding and
lNALûDEMANDûWASûLESSûTHANûTHEûSHARESûOFFERED
The company said that it had received
“substantial indications of interest” below
the range from large institutional investors.
As a result, shares are now offered at NKr20
each, 20% below the bottom of original guidance.Pricing at that level is providing momentum,
with some investors showing interest that had
not previously been involved at the earlier range.
!NYûREVISEDûmOATûWILLûNOWûNOûLONGERû
include secondary selling. Proceeds will fund
new and as yet unsanctioned projects.
Although Okea has 137 shareholders, the
company is largely held indirectly by Thai
RElNERû"ANGCHAKû#ORPORATIONûWITHûAûû
stake and 34.98% by Okea Holdings, controlled
by Seacrest Capital. Bangchak was only due to
provide some of the shares in a 15% secondary
greenshoe in the earlier incarnation of the deal.
Books will close on June 13 at 3pm in Oslo,
with a retail offer closing at noon. A formal
update on the revised deal is not expected until
Tuesday as Monday is a public holiday in Norway.
Pareto Securities, SEB and SpareBank 1 Markets
are bookrunners.
Robert VenesEQUITIES
Australia 78 China 79 Hong Kong 81 India 81 Belgium 82 Germany 82 Iceland 83 Norway 84
Russia 85 Switzerland 86 UK 86 United States 87 Canada 93 Structured Equity 96