Investors had a chance to take part in the Philippine growth story in 2013 through a blockbuster follow-on offering from tycoon Lucio Tan’s newly restructured holding company.
LT Group’s Ps37.7bn (US$874m) sale on April 17 was the largest equity offering in the Philippines, not including rights issues, trumping Cebu Air’s US$610m IPO in October 2010. It was also the first to include a formal cornerstone tranche, giving other investors the confidence to participate in such a large deal.
While the LT Group name was new, the company had traded on the Philippine stock exchange for some time as Tanduay Holdings. Tanduay was highly illiquid, however, with a free float of only 10.4%. The name was changed after Tan added his family’s stakes in several unlisted firms to the holding company.
Tangent Holdings, Tan’s main family holding company, subsequently reduced its stake in the LT Group from 89.6% to 74.4%, triggering the offering.
The company sold 1.84bn shares, including an overallotment option of 240m shares, at Ps20.50, the top of the Ps18.00–Ps20.50 indicative range, and a 12% premium to the April 5 closing price of Ps18.30.
Investors also were attracted to the LT Group as the only listed vehicle to offer exposure to Tangent’s tobacco, distillery and property operations – all growth businesses in the emerging economy. The stakes are in tobacco firm PMFTC, beverage company Asia Brewery, distillery Tanduay Distillers, Philippine National Bank and developer Eton Properties.
The various companies were known to local investors, but they were not as well known to the international investing community. As a result, management conducted non-deal roadshows several months ahead of the launch.
The strategy proved effective, with many institutions showing interest in the offer. More than 130 accounts participated and the deal was 7x oversubscribed, excluding the cornerstone tranche, drawing the largest order book for any Philippine equity offering.
The cornerstone tranche saw an impressive line-up of global funds. The 11 in the line-up, which bought 1bn shares, or more than half the deal, were Capital World, Fidelity, GMO, Henderson, Invesco, Lazard, Morgan Stanley, Newton, UBS, Waddell and Reed, and Wellington.
Timing proved ideal. It priced after Fitch’s upgrade of the Philippines’s sovereign rating to an investment-grade score of BBB– boosted the market.
About 82% of the deal went to long-only institutions and 17% to hedge funds. Asian investors bought 42% of the shares, while US investors US 35% and European investors 23%. UBS was the sole global co-ordinator and sole bookrunner.
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