FRONT STORY PHILIPPINES
San Miguel pares follow-on target
F&B unit launches Ps33bn offering, 73% lower than original filing
Weak emerging markets and liquidity
concerns have prevented San Miguel’s sale
of shares in subsidiary SAN MIGUEL FOOD AND
BEVERAGE from becoming the largest ever
equity capital market transaction in the
Philippines.
SMFB will open books for a smaller-than-
expected Ps33bn (US$611m) follow-on offer
with price guidance of Ps85–Ps95 per share,
SIGNIlCANTLYûLOWERûTHANûTHEûEARLIERû
indicative price of Ps140. San Miguel is also
selling 349m shares rather than the
originally planned 887m. There is an upsize
option of 174m shares, which would lift the
deal size to Ps49.68bn. The price range
represents a 0%–12% premium to the pre-
deal close of Ps85.
“Under the current market conditions it is
DIFlCULTûTOûRAISEûAûFEWûHUNDREDûMILLIONû
dollars, let alone billions of dollars,” an ECM
banker away from the deal said. “Big deals
can be done only in markets that have
several local institutions with deep pockets.
Foreigners are simply staying away.”
Tellingly, San Miguel, which was
originally planning to have cornerstone
investors in the SMFB follow-on, could not
lNDûENOUGHûINSTITUTIONSûTOûCOMMITû
themselves to the deal.
ECM activity has been lacklustre in the
country. Del Monte Philippines and Cal-
Comp Technology had to defer their
respective Ps13.5bn and Ps6.4bn IPOs earlier
this year, while property developer DM
Wenceslao shares are trading below the IPO
price of Ps12.
The benchmark Philippine Stock
Exchange Index had dropped 17% this year
to last Thursday while the peso has fallen
7.9% against the US dollar.LOCAL DEMAND
For now, demand is coming from local
investors. A banker on the deal said demand
for SMFB was strong from local institutions
and current indicative orders were in excess
of the base offering.
h7EûAREûKEEPINGûOURûlNGERSûCROSSEDûTHATû
these orders don’t disappear when books are
about to close,” the banker said.
San Miguel has kept its valuation
reasonable. The price range translates into a
2019 P/E multiple of 23–26 while local
competitors trade in a 28–32 range.The downsized deal is not small by any
means. If the upsize option is fully exercised
either at the top or bottom of the range, the
SMFB transaction will be Philippines’ largest
ECM transaction (rights excepted), beating
LT Group’s Ps38bn follow-on offer in 2013.
“If this deal gets done and trades well, we
could see a reversal in the fortunes of the
Philippine ECM,” a local banker said.
With the sale of 349m shares, SMFB’s free-
mOATûWILLûINCREASEûTOûTHEûûREQUIREDû
minimum from 4.1%. San Miguel originally
PLANNEDûTOûINCREASEûTHEûSUBSIDIARYSûFREE
mOATû
to up to 20%. San Miguel owns 95.9% of SMFB.
Last year, San Miguel merged its
BEVERAGESûBUSINESS ûINCLUDINGûITSûmAGSHIPû
beer unit, into SMFB and needs to complete
the follow-on offer to meet the stock
EXCHANGESûFREE
mOATûREQUIREMENT
There is a 180-day lock-up on the
company and the vendors.
JP Morgan, Morgan Stanley and UBS are the
joint global coordinators, and bookrunners
with Deutsche Bank and Goldman Sachs. BDO
Capital and BPI are the domestic
underwriters.
S AnuradhaSebi removes restrictions on Bandhan
At current prices, the 42.28% stake sale would total Rs223bn (US$3bn)
The Securities and Exchange Board of India
has removed share sale restrictions on
BANDHAN BANK and its main shareholder,
paving the way for an offer for sale that
could total US$3bn.
Bandhan Bank said in a stock exchange
announcement that Sebi had exempted
Bandhan Financial Holdings from a one-year
lock-up following the bank’s IPO, under
which it would not have been able to sell any
shares until March 31 2019.
Sebi has also exempted Bandhan Bank
from the rule that a company has to be listed
for one year before primary shares can be
sold. Bandhan Bank shares were listed in
March this year.
As a result of this exemption Bandhan
Bank can now sell primary shares using the
QUALIlEDûINSTITUTIONALûPLACEMENTûROUTE
At current prices a 42.28% stake sale will
total Rs223bn (US$3bn), although the lead
shareholder is unlikely to sell the entire
stake in one tranche.
Last month, the Reserve Bank of India said
the country’s youngest bank would not be
allowed to add branches and its founder and
CEO Chandra Shekhar Ghosh would not get
his next pay rise until Bandhan Financial’s
stake in the bank was reduced to 40% from
82.28%.
The shares of the bank, which had been
among the best performing of this year’s
Indian IPOs, had fallen 17% as of last Monday
since the RBI penalty.
Under Indian rules a lead shareholder has
to reduce its stake in a bank to 40% withinthree years of the bank beginning
operations, a deadline Bandhan Bank passed
in August.
Market participants said the lead
shareholder can sell the stake on the local
stock exchanges using the offer for sale
mechanism.
Bandhan Bank can also sell primary shares
to dilute the lead shareholder’s holding.
However, it does not immediately require
any funds after its IPO.
Bandhan Bank in March raised Rs45bn
through India’s largest bank IPO at Rs375 a
share.
Axis, Goldman Sachs, JM Financial, JP
Morgan and Kotak were the bookrunners for
the IPO.
S AnuradhaEQUITIES
Australia 76 China 76 India 77 Japan 77 South Korea 78 Thailand 79 Austria 79 Egypt 79
France 80 Germany 80 Kazakhstan 81 UK 83 United States 84 Structured Equity 88