Friday, February 18, 2000
Cheung Wah in placement worth $1.35b
LOUIS BECKERLING and ERIC NG
Cheung Wah Development's majority shareholder is to dispose of 100 million
existing shares through a placement worth up to $1.35 billion.
The move takes advantage of the counter's massive share price surge this year.
Chairman Lawrence Yu Kam-kee and his family will sell the shares to
institutional investors in Hong Kong, Europe and the United States, according to a source at Jardine Fleming, the placement's sole book-runner.
As the placement had already been fully subscribed in Hong Kong before
starting in London, the placement price was likely to be at the top end of the $13.15 to $13.55 target price range, the source said.
The range represents a discount of 4.9 per cent to 7.7 per cent on yesterday's closing price of $14.25.
The placement will see the Yu family's holding fall to about 160 million shares,equivalent to a stake of about 8.7 per cent after Softbank acquires its 61.1 per cent stake in Cheung Wah.
It will also increase the counter's public float to more than 30 per cent after the takeover is completed.
Cheung Wah heads the top 20 list of share price gainers on the Hong Kong
stock market so far this year, with a share price increase of 4,883.61 per cent.
Driven by news that Japan's biggest Internet investment company, Softbank,
will use the shell of the ailing textile company for its Internet activities, the Cheung Wah share price went from 30.5 cents at the close of trade last year, to $15.20 at the close on Wednesday.
This performance puts the company on a price to book valuation of about 93
times - making it the most expensive counter on the market.
The soaring share price has taken the market value of the company from
$217.85 million, at the close of trade last year, to its present value of about $11 billion.
At this rate of return, 70,000 Cheung Wah shares bought in March last year for just $4,200, would today be worth about $1 million.
Speculation by punters that similarly ailing companies could be targets of
Internet-related takeovers lies behind the massive advances shown by the
remainder of the top 20 gainers.
"It is not unlike the activity in 1993 when punters tried to anticipate which lame-ducks might be taken over to provide listed vehicles for business with mainland connections," said Kennedy Liu Tat-yin, a partner with Arthur
"How long this will last, I don't know.
"But the Internet does seem to me to be the future of Hong Kong and I think
this is different from what happened in the past," Mr Liu added.
Since Softbank's eventual 61.1 per cent of the enlarged share capital of Cheung Wah was bought at just 18 cents a share, its approval will be a formality.
In yesterday's statement, Cheung Wah also disclosed it had made a loss of
$17.98 million for the nine months to December 31.
It said after the takeover and the placement of shares to Softbank - which will net $200 million - the unaudited net tangible asset value of the group would be $411.93 million.
Published in the South China Morning Post. Copyright © 2000. All rights