Markets

Banks sell $2b worth of China Mobile stake

(Agencies)
Updated: 2010-09-25 10:26

SINGAPORE - Joint bookrunners Goldman Sachs, Morgan Stanley and UBS have sold about $2 billion worth of their remaining positions in China Mobile Ltd after a $6.5 billion block sale failed to clear the market at the first attempt, IFR reported on Friday.

The three banks were involved in a couple of clean-up trades in the days after they arranged and underwrote the sale of British telecoms company Vodafone's 3.2 percent stake in China Mobile in a block trade on Sept 7.

Bankers involved in the deal declined to comment, but other banking sources said the lead banks had offloaded about $2 billion of stock at below the HK$79.20 placement price.

The sources said the stock sales were handled in a fairly coordinated manner to minimize any further impact on the stock price. With that overhang on the stock now cleared, China Mobile has recovered to trade back above the block sale price.

The stock closed up 0.4 percent at HK$80.15 on Friday, having recovered from a three-month low of HK$76.20 on Sept 13.

Vodafone's sale of its entire stake in China Mobile was Asia's biggest-ever block trade, and the decision to underwrite the deal at an aggressive price highlights the confidence in Asia's equity markets.

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However, investors have also shown that they are not prepared to buy at any price.

The three lead banks marketed 642.87 million China Mobile shares at an indicative price range of HK$79.20-$80.00 each, representing a tight discount of 2.4-3.4 percent to the stock's Sept 7 close of HK$82.00.

The discount was much wider than the 1.2 percent to Newbridge Asia offered for its sale of a HK$9.08 billion stake in Ping An Insurance on Sept 2.

However, the size of Vodafone's selldown, at almost six times that of the Ping An disposal, meant many investors needed a wider discount. Fund managers said they were looking for HK$78.

"It was a very aggressive trade, so not many investors were keen," said one banker. In other words, they said the deal should have been marketed at a discount of at least 4.88 percent. The tight discount was, however, the result of keen competition for the mandate.

Banking sources said one of the banks that won the deal was particularly aggressive during the pitching process and promised to hard underwrite the entire transaction at a tight discount range of 2.4-3.4 percent.

The other successful firms, also with close relationships with Vodafone, were given opportunities to match that offer, and they did.