In a tricky year for Asia’s equity markets, one bank mastered the block business and succeeded with primary offerings, while its rivals stayed on the sidelines. For its impressive range of innovative solutions and an enviable appetite for risk, UBS is IFR Asia’s Equity House of the Year.
Negotiating Asia’s equity capital markets in a volatile year required all the adaptability and strength of a champion fighter. UBS showed it had both the muscle and agility to counter any challenge, building on its heavyweight reputation in Asian equities with a flurry of smart and innovative transactions.
With market conditions changing at a moment’s notice, bookrunners were constantly at risk of being caught off guard by tanking share prices, or of missing opportunities by being too cautious.
UBS showed an impressive sense of determination that kept it busy – and revenues flowing – throughout a year when new listings remained exceptionally challenging and many of its competitors stayed away from primary offerings.
It also played a leading role in the explosion of block trades during the year, coming up with innovative solutions to mobilise international capital for its Asian clients.
“Markets have been difficult, but we have continued to provide solutions for clients,” said Sam Kendall, UBS’s head of equity capital markets for Asia. “Our overwhelming focus has been on putting the client first but we have also sought to be proactive and entrepreneurial. In addition, having benefitted from an uninterrupted deal flow has allowed us to assess investor appetite and needs accurately.”
In China, UBS extended its dominance in the domestic markets to offer a full range of services to Chinese issuers. The Swiss bank was the only foreign arranger to work on both the A- and H-share tranches of the US$1.89bn Hong Kong and Shanghai dual listing of New China Life Insurance, the third-largest insurer in China, in December 2011. The deal was done at a time when many other companies were delaying their jumbo listing plans.
A fundraising for China Minsheng Banking Corp also demonstrated UBS’s ability to capitalise on its presence in both markets.
In March, UBS, alongside Haitong International, completed a H-share placement of HK$11.2bn (US$1.44bn) for China Minsheng at a tight discount of 5% to the last traded price.
UBS was also joint global co-ordinator on the HK$13bn Hong Kong IPO of Haitong Securities in March. The deal, postponed from November 2011, priced at a higher valuation on its second attempt.
Other jumbo transactions UBS’s from during IFR’s review period included the Rmb8.8bn A-share private placement of Chinese train manufacturer CSR Corp and the HK$7.01bn Hong Kong IPO of Inner Mongolia Yitai Coal, the first Chinese company with only a B-share listing to sell shares in the city.
New playbook
The block business also yielded some signature deals that differentiated UBS from its competitors, including the HK$5.85bn selldown in Macau gaming company Galaxy Entertainment on August 28.
Leveraging on the bank’s exclusive working relationship with certain investors, sole bookrunner UBS gauged interest from a small group of institutional investors with strong support from a large US long-only investor. Having secured the support of some distinctive anchors, UBS structured the deal as a club placement, instead of a traditional bookbuild. US investor Waddell & Reed, a repeat client for UBS as both a vendor and investor during the review period, was said to have bought shares worth US$550m in the transaction.
The limited distribution minimised market risk without leaving the vendor, private-equity firm Permira, at a disadvantage. The block of 278.8m Galaxy shares was sold at a modest discount of 4.1% to the pre-deal spot, and the stock rose 3.42% the day after the selldown, closing at HK$22.65 on August 29.
Just over two months later, UBS, once again as sole bookrunner, waived the previous lock-up attached to the above Galaxy block and brought another Permira selldown to the market.
The clean-up trade of 249.6m shares was priced at a discount of 5% to the pre-deal spot, to raise HK$6.78bn.
Again, the shares traded well in the aftermarket, closing at HK$27.35 the following day – 0.67% above the placement price.
The trades underlined UBS’s ability to find creative solutions to the problems presented by a turbulent equity market.
“Difficult markets present two options – either sit on the sidelines or draw on your intellectual capital and the breadth of our business to address client needs,” said Kendall. “What sets us apart has been a willingness to rip up the playbook and not be hostage to the previously tested game plans that may have worked in 2007 but no longer apply today.”
Building blocks
In South Korea, that innovative thinking was again in evidence in a triple-decker block trade that raised a total of W577.9bn (US$532.7m) for steelmaker Posco.
In the largest of the three simultaneous trades in April, Posco sold 2.3m shares in SK Telecom at W137,000 each, a 3.9% discount. The company also sold 2.2m shares in Hana Financial at W44,450 apiece, a 1% discount, and 3.9m shares in KB Financial at W42,300, flat to the last closing price. UBS was joint bookrunner for the transactions.
It also led the way with a new structure in India, working as joint bookrunner for the country’s first institutional placement programme to raise Rs4.7bn (US$85m) for Godrej Properties. This oversubscribed deal was a notable achievement in a year in which a number of Indian equity deals ended in disaster.
Having maintained its leadership in the Australian equity market for yet another year, UBS again tried something new in an environment where big trades were few and far between. Acting as adviser to coal freight operator QR National and sole placement agent to the Queensland Government, it managed a A$1.5bn (US$1.6bn) equity selldown for the state. Splitting the deal between an A$1bn stock buyback and A$500m placement allowed the shares to be sold at a premium to the market price, ensured a strong aftermarket performance and cleared the overhang on the stock.
Meanwhile, as momentum shifted to South-East Asia this year, UBS was again at the forefront of some unusually busy markets.
Its continued strong presence in the Philippines paid off this year, as the PSE finally sprang into life, with companies scrambling to boost their free-floats ahead of a regulatory deadline. The year’s standout deal, the US$504m GT Capital IPO, was the tenth consecutive capital market transaction UBS has won on a sole basis with the Metrobank group.
In Malaysia, UBS was the sole foreign bank to win a role on the US$1.2bn follow-on offering for Maybank, which achieved a tight 1.2% discount, and a joint global co-ordinator on the US$1.5bn Astro Malaysia Holdings IPO.
In Singapore, UBS managed three follow-on offerings totalling US$698m, including the US$262m offering of Sembcorp Marine, while, in Indonesia, it featured on a US$100m block trade for Tower Bersama.
UBS also made its mark in the equity-linked space, acting as joint bookrunner for the year’s largest, and most innovative, convertible bond issue in Asia. The US$500m five-year issue for Hong Kong Exchanges and Clearing was the issuer’s first foray into the capital markets since listing, but secured a high conversion premium and was fully increased in size.
Across the region, UBS stood out for printing successful trades as other banks stood on the sidelines, and for doing more than its rivals to meet issuers’ objectives in difficult market conditions.
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