Global sentiment towards the Philippines improved during the year, but efforts to improve stock market liquidity yielded only mixed results. For proving that a big listing is possible in a thinly traded market, GT Capital’s US$456m IPO is IFR Asia’s Philippines Capital Markets Deal of the Year.
The lack of depth in the Philippines stock market has long been a challenge for companies looking to access equity capital – especially those looking to do so in size. GT Capital Holdings, however, challenged this perception with a Ps21.6bn (US$456m) IPO in April, and a 25% gain from listing to the end of IFR’s review period left no doubt that the Philippines market is capable of supporting a deal of its size.
It was comfortably the country’s biggest IPO in the year under review, and only the third biggest on record.
GT Capital is the primary holding company of the Ty family, with interests in the banking, real estate, power generation, automotive and life insurance businesses.
Its broad footprint meant the bookrunners needed to position the IPO as a proxy for Philippines economic growth, and convince investors of the Philippines’ story. On the domestic front, the task was to create a broad enough investor base to ensure the market would be able to absorb an offering of such a magnitude.
The IPO was marketed in three stages over as many months, with the arrangers first targeting anchor investors before an extensive investor education programme and finally an eight-day global roadshow.
The investor education was crucial because of the different components of GT Capital’s business portfolio. The company’s banking business is conducted through a 25% stake in Metropolitan Bank & Trust; the real-estate operation through an 80% stake in Federal Land; the power generation business through a 39% stake in Global Business Holdings; the automotive business through a 21% stake in Toyota Motor Philippines and the insurance business through a 25% stake in Philippine AXA Life Insurance.
The float drew a solid response from investors. The 41.2m-share base deal was covered on launch day one of the launch and the final international offer of 28.8m shares was over 5x times subscribed. As per Philippine regulations, 12.4m shares, 30% of the offer, were sold to domestic investors and the rest to international investors.
Six anchor investors took up shares totalling US$125m with the allocation to the single largest anchor amounting to US$25m. Asian investors accounted for 65% of the IPO demand, the EU 23% and the US 12%. Long-only institutions made up 44% of the investors, hedge funds 45% and wealth management 1%.
The timing took full advantage of investor appetite, coming after the PSE Composite Index had gained more than 15% since the start of the year. The quality of GT Capital’s management was also a selling point for the IPO.
Despite the strong response, the company priced the IPO at Ps455, slightly off the top of the Ps415–Ps470 indicative range. The company did not want to price aggressively – a mistake previous large issuers made.
GT Capital’s IPO price represented a 2012 P/E multiple of 13x – in line with the industry average.
UBS was the sole global co-ordinator and sole international bookrunner, extending its dominance in the country’s equity capital markets. The GT Capital IPO was also the result of a long-running relationship between UBS and the Metrobank Group, a subsidiary of GT Capital.
First Metro Investment was the sole domestic co-ordinator.
The 41.2m-share float comprised a primary offering of 33m shares and secondary offering of 8.2m shares from shareholders Titan Resources and Ausan Resources. The Ty family’s stake in the company was reduced to 70% from 100% after the IPO. The IPO shares represented 26% of the company’s post-offer paid-up capital.
The company will use the proceeds from the IPO to expand the Toledo power plant on Cebu Island and consolidate the non-bank investments of the Ty family into GT Capital.
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[Corrects deal size.]