The dual listing of a South-East Asian hospital operator between Malaysia and Singapore set a landmark in a busy year for the region’s equity capital markets. For flawless execution of a complex trade, IHH Healthcare’s M$6.73bn (US$2.2bn) IPO is IFR Asia’s Malaysia Capital Markets Deal of the Year.
July was not a great month for equity issuers to launch anything new or complex, with seemingly no window of market stability long enough to complete an IPO. Still, IHH Healthcare not only completed its M$6.73bn (US$2.2bn) IPO at a strong valuation, it also pioneered the concept of the two-city float in the ASEAN region, as well as becoming the first listing in the region to be offered simultaneously in two currencies.
The deal was flawlessly executed, despite a highly aggressive timetable. From kicking off the IPO process in January, the stock was listed in Malaysia and Singapore before the end of July. In between, IHH wrapped up the acquisition of Turkish healthcare provider Acibadem Holdings, which, due to a quirk of that country’s M&A process, still had a small stake listed on its local exchange.
Healthcare was an attractive sector to foreign investors, but IHH still played safe, locking in cornerstone orders for 62% of the IPO size. In the past, foreign investors had almost never participated in Malaysian IPOs as cornerstones, but they jumped at the chance to commit to this deal. Among the 22 cornerstones were the likes of AIA, BlackRock, Capital Research and Singapore’s GIC.
IHH was formed from the combination of Parkway, formerly a Singapore-listed healthcare business, and Pantai of Malaysia. That history needed to be balanced with the majority ownership of Malaysian sovereign investment agency Khazanah and the perception that the Singapore Exchange would provide a better environment and higher valuation for healthcare stocks.
As the deal was the first dual Malaysia and Singapore IPO and there were no prescribed guidelines from regulators, the issuer and the bookrunners had to do much of the work themselves, creating a structure and then submitting it for approval. Malaysian cornerstone investors are subject to a lock-up period, while there is no such requirement in Singapore. So, the IHH deal struck a balance between the two, imposing a six-month lock-up on each cornerstone’s shareholding beyond the first 50m shares. The marketing and disclosure period was also halfway between Singapore’s standard process and Malaysia’s lengthier one.
Both tranches were denominated in their country’s home currencies, with the Malaysian ringgit and Singapore dollar shares fully fungible in a process that takes one trading day.
There were fears that the smaller Singapore tranche would turn out to be illiquid, but it now records impressive trading volumes almost as high as the Malaysian component, and there are no signs of investors using the two tranches for arbitrage.
Even without the complex considerations of the structuring, the deal was a huge success considered simply as an IPO. The institutional tranche was more than 130x covered at the base deal size, with demand split evenly between foreign and domestic investors.
The deal priced at M$2.80/S$1.113 per share, below the top of the M$2.67–$2.85 range, leaving some money on the table for investors, despite the blowout book, and both tranches gained 10% on their debuts on July 25.
The deal comprised 2.235bn shares and a 169m-share greenshoe option, which was used in full.
In a year when Malaysia stood out as one of the world’s top markets for IPOs, with three of US$1bn or more, IHH was the pick of the bunch. It achieved its listing ambition, broke new ground for ASEAN issuers, achieved a high valuation and still made money for investors.
Bank of America Merrill Lynch, CIMB and Deutsche Bank were joint lead co-ordinators, while Credit Suisse, DBS, Goldman Sachs and Maybank were joint bookrunners. Nomura, OCBC and UBS were co-lead managers.
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