Fearless execution
A HK$11.8bn (US$1.5bn) top-up share placement of Anta Sports Products showed high-quality Chinese issuers could still raise big money from the Hong Kong equity capital market through well-timed and reasonably priced transactions.
Hong Kong’s stock market started the year strongly after China reopened from almost three years of stringent Covid-19 restrictions. However, this did not last long and a deep correction followed in March.
Seeing signs that the market had started to stabilise, Chinese sportswear company Anta on April 17 launched an offer of 119m shares, or 4.2% of the enlarged share capital, in an indicative range of HK$99.08–$102.27 each or a 6%–8.9% discount to the pre-deal close of HK$108.80.
Some market participants found it hard to believe the market could digest such a sizable transaction – 2023’s largest primary follow-on in Asia Pacific excluding A-shares at the time – especially from a Chinese issuer, when investor confidence was still weak.
Global investors were extremely cautious over Chinese names amid the country’s sharp economic slowdown and regulatory tightening.
The deal launched when Hong Kong’s benchmark Hang Seng index was around the psychologically important level of 20,000 points. Despite the challenging backdrop, sole overall coordinator UBS and joint placing agents Citigroup and Morgan Stanley agreed to hard underwrite the deal and launched it without wall-crossing the transaction with investors to avoid the news leaking.
The banks believed investors were willing to take the risk at the right price as Anta is a blue-chip stock and very liquid.
The deal was covered within 30 minutes of launch and eventually drew almost US$6bn of demand from around 100 investors. Demand from long-only investors covered around one-third of the deal and there was good support from global long-only investors, sovereign wealth funds and international hedge funds.
The offering, which was priced at HK$99.18 each or an 8.8% discount, is the largest ever Hong Kong consumer primary follow-on.
To secure a decent aftermarket performance, allocations were concentrated and skewed towards sovereign wealth funds, long-only funds and fundamental investors. The top five investors took more than half of the deal and the top 10 investors almost 75%.
The stock closed at HK$100.70 on April 18, down 7.4% but still 1.5% above the placement price.
The placement was also the first to come to the market after the China Securities Regulatory Commission required all Chinese companies – whether incorporated in China or overseas – to file detailed information of their follow-on offerings within three working days of completion, effective from March 31. It set a template for other transactions.
To see the digital version of this report, please click here
To purchase printed copies or a PDF, please email shahid.hamid@lseg.com