K Wah seeks $2.15b to fund casino deal
K Wah seeks $2.1b to pay for casino
K Wah Construction Materials is to tap the market for up to $2.15 billion through a share placement to help finance the acquisition of Galaxy Casino in Macau.
After the stock market closed yesterday, K Wah said it was offering 253.8 million new shares at between $8 and $8.50 each, representing a discount of 0.58 per cent to 6.43 per cent on the closing price of $8.55. The stock fell 11.85 per cent yesterday as profit takers cashed in on Tuesday's 14.11 per cent rally.
UBS Investment Bank is the bookrunner and placing agent.
The placement comes a day after K Wah announced it would buy 97.9 per cent of Galaxy Casino from chairman Lui Che-woo for $18.4 billion.
The firm's share price had risen more than 1,100 per cent in the past year on expectations of a Galaxy deal, which will make it the first Hong Kong-listed casino operator.
'The share sale is widely expected after the announcement of the asset injection, while profit taking usually takes place after the formal announcement,' said Kenny Tang Sing-hing, an associate research director at Tung Tai Securities.
Besides seeking funding, K Wah will need to sell at least 433.31 million new shares to maintain a public float of 25 per cent, meaning the firm will have to sell an additional 179 million new shares.
Louis Wong Wai-kip, a research director at Philip Securities, believed the share placement would generate a warm response, while Mr Tang expected the company to tap the market further to finance future expansion.
K Wah said it planned to invest $5.7 billion in four projects over the next five years, including the $1.83 billion Galaxy StarWorld and $4.08 billion Galaxy Cotai Macau Resort.
The company, which plans to change its name to Galaxy Entertainment Group, said the $18.4 billion asset injection would be paid for by placing $14.72 billion worth of new shares at $8 each, while $3.68 billion would come from fixed-rate notes or cash.
Other Macau plays also fell yesterday. Melco International Development slid 3.16 per cent to $19.90. A-Max Holdings dipped 5.37 per cent to 88 cents.
Traders expect to see a flight of capital to Galaxy Casino. 'Those Macau concept stocks without solid fundamentals will face a wave of selling pressure,' Mr Tang said.
