Investment banks are jostling to bag deals in Singapore and are willing to take a few bruises judging from a recent brawl over a share sale for shipping group Neptune Orient Lines Ltd (NOL).
The feeding frenzy is driven by hopes that a recovering economy and rising stock prices will encourage the governments investment holding group, Temasek Holdings Pte Ltd, to begin reducing its stake in many of Singapores top-name companies.
In Singapore, its all about government-linked corporations including Temasek selling down their stakes. We will probably see more in 2004, said Ronald Ong, Morgan Stanley's managing director in Singapore.
The city-state's investment banking scene is small by world standards but it has been growing fast with US$2.67bil in equity deals to date this year, up 82% on the same period last year, according to financial data provider Dealogic.
In contrast, the volume of equity deals by Hong Kong firms have slipped 4.3% so far this year to US$5.76bil from the year-ago period.
And all eyes next year will be on Temasek, which has said it would dilute stakes in its companies in the right market conditions, and would sell off those where it does not make commercial sense to remain as a shareholder.
Temaseks companies read like a whos who of blue-chip firms in Singapore, and include Singapore Airlines (SIA), Singapore Telecommunications Ltd (SingTel), DBS Group Holdings Ltd, CapitaLand Ltd, Keppel Corp Ltd and SembCorp Industries Ltd.
But the pitfalls of winning business in the small city-state were on show when NOL announced a cash call recently.
Top-name banks including J.P. Morgan, Smith Barney, Morgan Stanley, UBS Warburg, and Credit Suisse First Boston (CSFB) pitched for the deal, investment banking sources said. CSFB eventually won the mandate to raise US$308mil by selling 236 million new NOL shares at S$2.32 each.
The sources said most banks had bid at around an 8% discount to NOLs Nov 7 closing price of S$2.44, but CSFB won by offering to do the deal at only a 4.9% discount.
On Nov 10, CSFB launched the deal but found no takers at its price and ended up owning around 20% of NOL. Four days later the bank did sell about two-thirds of the stake, or 153.17 million shares, but at prices that resulted in a loss of about US$7.1mil, which more than wiped out its 1%, or US$3.1mil, underwriting fee. And it was still left with 6.42% of the container shipping line. Reuters
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