Hong Kong has reached a high in follow-on share issues this week, coming in second place behind Shanghai with secondary share activity valued at US$8.5bn in record year-to-date figures.
According to Mayer Brown JSM partner Jeckle Chiu, the secondary offerings that now inundate the Hong Kong market are indicative of a robust economy gaining pace.
“From a comparative perspective, 2009 saw many dilutive offerings – share issues made by companies as a fund-raising exercise – where banks and companies were trying to boost their capital ratio. What we are seeing more and more is non-dilutive offering by shareholders getting cash for themselves. This makes up a significant portion of follow-on offer issues this year and it is a trend we are seeing more and more in Hong Kong,” Chiu told ALB.
According to the Thomson Reuter’s deals intelligence report for week beginning 9 September 2010, CML’s follow-on offering in Hong Kong completed this week was rivalled only by the US$6.9bn offering from China mobile in October 2000 – a deal that encapsulates the trend of shareholder exit for value as opposed to capital-raising by companies.“When the market conditions are good, you tend to see a lot of such transactions,” Slaughter and May partner Benita Yu said.
“We have seen a numberof good deals come through. The market has been relatively good in the past three months. Earlier in the year there have been some dips in the market and sentiment might not have been there to support deals of this sort.”
Slaughter and May recently advised Semiconductor Manufacturing International Corporation (SMIC) on its placing of new shares in a US$100m follow-on offering issue and an additional US$100 million share placing to Datang Telecom Technology & Industry partly in an exercise of its anti-dilution rights. The team was led by partner Benita Yu.
“This deal was complex because there were two placings. The company raised approximately US$200m altogether. SMIC has two major shareholders – one of which is Datang, a majority shareholder holding just under 20%. It is complex because Datang and the other shareholder have certain anti-dilution rights in the company. In our follow-on share placing marketed to institutions, it triggered the rights of these two companies to subscribe for more shares. Interestingly, Datang did not stop at exercising its anti-dilution rights to take its shareholding to its previous level, but it also subscribed for more shares in our client,” Yu said.ALB
Other related stories: