Felda set to price US$3.2b IPO at top end
KUALA LUMPUR, June 13 — Malaysian plantation operator Felda Global Ventures Holdings is set to price its up to US$3.2 billion (RM10.18 billion) IPO on Wednesday at the top of an indicative range, as strong demand from domestic investors helps it counter a recent global trend of failed listings.
The deal, the world's second biggest initial public offering this year behind Facebook Inc.'s US$16 billion offering, will put Kuala Lumpur neck and neck with China'sShenzhen as the main IPO destination in the Asia Pacific region, leaving behind Hong Kong which grossed the highest IPO proceeds in the world in 2010 and 2011.
The IPO also underscores how Malaysia's equity market has been partially insulated from global volatility because it is dominated by local investors and a large domestic pension fund system.
"There is a large pool of institutional money within Malaysia looking for investment opportunities," said Singapore-based John Doyle, chief investment officer of equities at UOB Asset Management.
"You are finding a fair bit of demand for the new issues coming from domestic institutions and that is the single biggest differentiator," he added.
There is also significant political capital invested in the state-owned company's share sale, which is set to deliver a windfall totalling more than US$500 million to tens of thousands of small landholders in what is likely to be an election year.
Felda, the world's third largest palm oil company by acreage, has seen demand from institutional investors that was 30 times larger than the amount of shares offered, excluding the amount set aside for cornerstone investors, Thomson Reuters publication IFR reported on Tuesday.
The company is offering 2.19 billion shares in the IPO at a range of 4.00-4.65 ringgit, putting the base offering at up to 10.18 billion ringgit (US$3.2 billion).
A successful Felda deal will bring an end to the drought in Asia Pacific offerings, where deal volumes, including follow-on, have dropped 47.5 per cent since the beginning of the year to US$67.8 billion, according to Thomson Reuters data.
About a fifth of the proceeds will be handed out to 112,635 landholders, or settlers, giving them a combined windfall of US$553 million or nearly US$5,000 each. That is more than the annual minimum salary, adding to the economic feel-good factor that the ruling National Front coalition is trying generate ahead of an election expected later this year.
Tumbling global markets
CIMB Investment Bank, Maybank Investment Bank and Morgan Stanley are the joint global coordinators for Felda's listing, with JPMorgan and Deutsche Bank also acting as joint bookrunners.
The outcome of Felda's deal and other recent Malaysian IPOs contrasts sharply to the tumble in equity capital markets activity and pulled deals in Hong Kong,London and other parts of the world. Late last month London luxury jeweller Graff Diamonds ditched its US$1 billion IPO in Hong Kong and a day later motor sport racing company Formula One delayed its Singapore offering worth up to US$3 billion.
Hong Kong's IPOs have had their slowest start in about four years with offerings down 85 percent in the first five months of the year. Just last week, Chinese coal producer Inner Mongolia Yitai Coal decided not to start bookbuilding for its Hong Kong deal..
Still, several multi-billion dollar offers from Asian companies are set to be launched later this year, including IHH Healthcare Bhd's US$2 billion IPO also in Malaysia.
Felda's deal will set Kuala Lumpur as Asia's top IPO destination, past Shenzhen's ChiNext board of high-tech start-ups that has seen US$3.4 billion of new listings so far in 2012. The Malaysian exchange had five IPOs so far this year that raised a combined US$348 million, data showed.
Other large deals in the Philippines and Thailand underscore the significance bankers and investors are increasingly placing in Southeast Asia as markets crumble elsewhere in the region.
"Southeast Asia is emerging as an important destination for IPOs, not just for domestic leaders, but increasingly as a listing venue for leading global companies," said David Aronovitch, a managing director and co-head of investment banking for Southeast Asia at Morgan Stanley.
"There are several world-class companies across diverse industry sectors seeking to go public in Singapore, Malaysia and Indonesia in 2012, and we see this trend increasing going forward." — Reuters