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Monday, 20 August 2018

Australia/New Zealand Equity House

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UBS has been facing some reinvigorated competition in Australasian equities of late, but it came back stronger in 2015, leading the way with jumbo bank recapitalisations, arranging the largest IPO of the year and maintaining its focus on innovation.

Capital-raising activity of Australia’s banks was a key theme throughout the year. After regulators asked the country’s major lenders to set aside more capital against potential loan losses, the big four banks all completed major equity offerings to raise a combined A$16.56bn (US$11.9bn).

In an endorsement of its execution capabilities, UBS was on two of the four jumbo share sales, jointly underwriting the rights issues of A$5.06bn for Commonwealth Bank of Australia and A$3.5bn for Westpac.

UBS cemented its relationship with Westpac in June with a structured sell-down of A$672m in BT Investment Management. Instead of being a full institutional sell-down, it came with a unique offer structure.

UBS, as joint bookrunner, helped Westpac sell 55m BTIM shares at A$8.2 each to institutional investors. Then, as the second part of the offer, Westpac sold 27m BTIM shares at the same price in a retail offering to eligible BTIM and Westpac shareholders.

The structure of the deal allowed Westpac to cash in part of its BTIM investment to boost its own capital adequacy ratio, while, at the same time, maintaining a good relationship with BTIM. After the sale, Westpac still holds a 30.4% stake in BTIM.

UBS also completed the largest IPO in Australia during IFR’s review period – in a year when volatile market conditions saw many other IPOs pulled or postponed.

UBS, as one of the joint leads, sealed the A$947m IPO of Link Administration, one of Australia’s largest fund administration providers, in October after pricing the shares at the top end of the indicative range. The stock traded well, rising 15.5% from its IPO price as of November 24.

It was prepared to make some bold market calls. Four times during the review period, UBS priced block trades at a premium to the market level. The biggest of all was a block of A$230m in cleaning-and-catering company Spotless in March, priced at a 0.45% premium.

A sell-down in Healthscope also demonstrated UBS’s execution ability in a hotly contested private equity mandate. As sole bookrunner, UBS helped TPG and Carlyle raise A$945m from the sale of a combined 350m shares, or about 53% of their Healthscope holdings, in September. The price of A$2.70 a share represented a tight discount of 0.4% to the pre-deal spot.

The stock fell 4% a day after the placement, but clawed back lost ground, rising to A$2.83 on November 23, before the sponsors sold their remaining stakes.

To see the digital version of this report, please click here.

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