This article first appeared in The Edge Malaysia Weekly on December 31, 2018 - January 6, 2019
BY sheer size alone, S P Setia Bhd’s RM3.3 billion non-IPO fundraising exercise — consisting of rights issue of shares, rights issue of redeemable convertible preference shares (RCPS-i B) and a private placement — takes the trophy as best non-IPO fundraising via equity.
Maybank Investment Bank was principal adviser, managing underwriter, joint global coordinator, joint placement agent and joint bookrunner for this deal.
The RM3.3 billion raised is mainly earmarked for the acquisition of I&P Group Sdn Bhd, making it the largest real estate follow-on equity deal in Malaysia this year.
In terms of rights issue, it can also boast of being the largest real estate rights issue in the history of corporate Malaysia, successfully raising RM1.068 billion on Jan 4, 2018.
A total of 403.26 million rights shares were issued on the basis of two rights shares for every 15 existing shares held. The rights shares were priced at RM2.65 each, representing a discount of 20.2% to the theoretical ex-rights price of RM3.32 per share — attractive for shareholders who believe in the prospects of the enlarged group.
The rights received strong support from S P Setia’s major shareholders, Permodalan Nasional Bhd (PNB) and its funds, which provided an undertaking to subscribe in full to their entitlements under the rights issue.
Notably, the rights issue was oversubscribed by 8.2%, indicating strong response from entitled shareholders.
At the same time, S P Setia also successfully raised RM1.06 billion through 1.21 billion rights issue of RCPS-i B, on the basis of two RCPS-i B for every five existing shares held.
Similarly, PNB and its funds showed support for the rights issue of RCPS-i B by undertaking to subscribe in full their entitlement amounting to 65.6% of the total offering, as well as an excess undertaking of up to a maximum of RM340 million in value of RCPS-i B. The implied conversion price of the RCPS-i B was fixed at RM3.70 for every new share, representing a premium of approximately 11.4% to the theoretical ex-rights price of RM3.32.
The RCPS-i B carry rights to receive preferential dividends at a rate of 5.93% per annum out of the distributable profits of the company. Furthermore, there is an additional step-up of 1% preferential dividend rate payable on the RCPS-i B annually after the fifth year of the issue date, provided the aggregate of the preferential dividend rate does not exceed a total rate of 20% per annum. This RCPS-i B was oversubscribed by 20.94% by its entitled shareholders.
Most of the net proceeds from the rights issue of ordinary shares and rights issue of RCPS-i B were used to part finance the acquisition of I&P Group, for a purchase consideration of RM3.65 billion. This lower borrowing funding will help the company save on interest expenses in the future.
Besides the two rights issue, S P Setia also raised RM997.8 million through a private placement of 325 million new shares on Feb 9, representing 9.5% of the existing share capital of S P Setia and 8.7% of the enlarged share capital of the company.
The private placement is the largest real estate sector placement exercise in the country’s history, followed by its primary placements in February 2013 and March 2011, which raised RM942.9 million and RM884.7 million respectively.
The shares were offered at the price range of RM3.07 to RM3.11 per share, a discount of 4.6% to 5.8% to S P Setia’s five-day volume weighted average price on Jan 29, 2018. The book closed within 2.5 hours after its launch and received demand of RM1.4 billion in value, which works out to 1.4 times cover at RM3.07 per share.
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