Retail Conglomerate Cosco Capital Inc., belonging to grocery and logistics magnate Lucio Co, has raised a capital of $ 400 million (PH 16.8 billion) in a 1.6 billion international share sale at P10.50 per piece. In a briefing, Cosco Capital President Leonardo Dayao told reporters that the capital raised from the transaction, which included new and secondary shares will be used for expanding its core business areas such as retail, oil storage, real estate development and liquor distribution. Stephen Cuunjieng, head of the Asia unit of Evercore Partners Inc. who arranged the sale told media persons in a briefing at Manila, “Cosco Capital and majority shareholder Lucio co sold around 1.6 billion shares at 10.5 pesos each in a transaction which widened the company’s public ownership to 30 percent”. He also said bulk of the investors came from Asia. JP Morgan, Deutsche Bank, First Metro Investments Corp and BDO Capital Investments handled the offering. The offering was placed at a steep discount. Cosco Capital is relatively illiquid and has not done any international placement of shares. The Conglomerate has plans to sell around 2 billion common shares to qualified institutional buyers in the Philippines and other foreign institutional investors. Leonardo Dayao, also told that Cosco Capital will be a focussed retail conglomerate and would like to expand those businesses related to or complementary to retail. Half of the proceeds raised by the share sale would be used to expand the selling area of Puregold-anchored commercial real estate properties and increase the oil and petroleum storage of pure petroleum. Another 20 percent has been allocated for the acquisition of non-food related businesses like hardwares and pharmacies. Another 20 percent will be used for debt payments and the remaining ten percent to improve its distribution network. It has plans to acquire a pharmacy chain and a network of home improvement stores in the next few months.
The follow-on offering or Re-IPO as it is known has been widely expected by the market ever since the company restructured of what was only once purely into oil, gas and mining sectors. Century Properties, a Philippine property developer had also made a follow-on offering in 2012 to raise Ps 3.5 billion to ps 4.7 billion mainly to boost the company’s free float.
What is a Re offer price?
It is a price at which the underwriting syndicate of a debt resells the bonds to its public investors. The syndicate will purchase the bonds for a specified amount from the issuing and re-offer the bonds to the public usually at different prices.
An underwriting investment bank may facilitate a debt issue by agreeing to purchase all of the bonds for a price below face value. The advantage of the investment bank purchasing the bond issue, instead of passing the sale directly to the public will remove the risk of the company of not selling the entire issue. The investment banker will re-issue the bonds to the public at a slightly higher rate than the original bond or offered at a discounted rate to the public.
Shares of the company previously known as Alcorn Gold Resources Group dropped 32 percent to 10.20 pesos when trading ended on 31st May, 2013 in Manila. This was the biggest decline since January 21, 2003. It closed at 15 pesos on May 29th.