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Grab upsizes term loan to $2bn on strong US demand

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Grab, south-east Asia’s biggest start-up, has amassed $5bn in cash reserves after increasing the size of its debut term loan facility, underscoring the pent-up international demand for the region’s fast-growing unicorns.

The Singapore-based company, which provides services including ride-hailing, food delivery, payments and insurance on its app, upsized its term loan from $750m to $2bn following commitments from investors, more than half of which were US-based institutions including BlackRock, Carlyle, Eaton Vance and Anchorage. 

Grab is one of many companies taking advantage of lower interest rates and tapping debt markets during the coronavirus pandemic. But the extent of investor interest has prompted its executives to consider an initial public offering in the US this year, according to two people with direct knowledge of the discussions. 

An IPO of the SoftBank-backed company, which is valued at more than $16bn, would be closely watched as a critical test of the ability of south-east Asia’s tech groups to go public. Very few companies from the region, which has one of the world’s fastest-growing mobile internet populations, have listed on public markets. 

Those that have listed overseas have been bolstered by their access to a regional consumer market of more than 655m people.

One of the highest-profile examples has been Tencent-backed Sea Group, which operates gaming company Garena and ecommerce platform Shopee. Sea’s New York-listed shares rose 395 per cent in 2020, making it one of the year’s best performers. In December, Sea increased the size of its secondary stock offering to raise nearly $3bn in response to robust investor interest. 

In terms of internet growth, south-east Asia is “at a frontier stage”, said Kenny Liew, a technology analyst at data and research group Fitch Solutions.

“South-east Asia-focused companies such as Sea Group and Grab have come into the spotlight after a decade of investor interest focused on US and Chinese tech players,” Mr Liew said. “There is much untapped potential in the market.”

Other companies hoping to capitalise on that demand are launching their own IPO plans. 

Grab’s main rival, Indonesia-based Gojek, may test the market later in the year. Gojek is in advanced merger talks with Tokopedia, another local ecommerce unicorn, to create Indonesia’s biggest tech conglomerate. The pair intend to list the combined entity this year if the talks are fruitful.

Grab and Gojek previously held merger discussions, but those talks have paused. 

Anthony Tan, Grab’s chief executive, said the enlarged term loan illustrated investor belief in the value of Grab’s “super app” platform

The proceeds of the loan will take the company’s cash reserves to more than $5bn, enough to cover operating costs for at least three years. Moody’s and S&P Global Ratings gave Grab ratings of B3 and B minus, respectively, with stable outlooks.



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UK listing rules set for overhaul in dash to catch Spacs wave

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A Treasury-backed review of the City has called for an overhaul of company listing rules so London can better compete against rivals in New York and Europe and grab a share of the booming market for special purchase acquisition vehicles.

The review, to be published on Wednesday, also proposes allowing dual-class shares to give founders greater control of their businesses and attract a wave of tech companies to the London market.

The City’s attractiveness has stumbled in recent years as the US and Hong Kong have swept up the majority of in-demand tech listings. New York’s markets have been further swelled this year by a surge of so-called Spacs, which raise money from investors and list on a stock market, then look for an acquisition target to take public. Britain’s edge also has been eroded by a loss of trading businesses to European rivals since Brexit.

Rishi Sunak, chancellor, who commissioned the independent report, said the government was determined to enhance the UK’s reputation after leaving the EU, “making sure we continue to lead the world in providing open, dynamic capital markets for existing and innovative companies alike”.

The review, which was carried out by Lord Jonathan Hill, former EU financial services commissioner, has recommended a wide range of reforms to loosen rules that have tightly governed listings in the UK.

Lord Hill has recommended lowering the limit on the free float of shares in public hands to 15 per cent — meaning founders need to sell fewer shares to list — and wants to “empower retail investors” by helping them participate in capital raisings. 

He has also proposed a “complete rethink” of company prospectuses to cut regulation and encourage capital raising, and suggested rebranding the LSE’s standard listing segment to increase its appeal. The chancellor should also produce an annual “State of the City” report.

The government said it would examine the recommendations — many of which require consultations by the Financial Conduct Authority.

Lord Hill also recommended that the FCA be charged with maintaining the UK’s attractiveness as a place to do business as a regulatory objective. 

The FCA said it aimed to publish a consultation paper by the summer, with new rules expected by late 2021. 

Lord Hill said the proposals were designed to “encourage investment in UK businesses [and] support the development of innovative growth sectors such as tech and life sciences”.

He said the UK should use its post-Brexit ability to set its own rules “to move faster, more flexibly and in a more targeted way”, in particular for growth sectors such as fintech and green finance.

However, the recommendations will cause concern among some institutional investors which have argued that loosening rules around dual-class shares, for example, will risk lowering corporate governance standards. 

The review said London needed to maintain high standards of governance, with various ways recommended to mitigate risk. On dual shares, for example, it recommended safeguards such as a five-year limit.

Amid fears that the government could go too far with a drive for deregulation, Lord Hill said his proposals were “not about opening a gap between us and other global centres by proposing radical new departures to try to seize a competitive advantage . . . they are about closing a gap which has already opened up”.

Other recommendations include making it easier for companies to provide forward-looking guidance when raising capital by amending the liability regime, and improving the efficiency of the listing process. 

The inclusion of a recommendation to help Spacs list in London by no longer suspending shares after a target is picked will be welcomed by many investors.

However, the rapid growth of such vehicles loaded with billions of dollars in speculative cash has also raised concerns about a bubble forming in the market.

Lord Hill said there was a risk that the UK was losing out on “homegrown and strategically significant companies coming to market in London” from overseas Spacs.

The UK has lagged behind New York and Hong Kong in attracting the types of companies from sectors, such as technology and life sciences, that dominate modern economies and attract investors seeking growth stocks. 

London accounted for only 5 per cent of IPOs globally over the past five years, while the number of listed companies in the UK has fallen by about 40 per cent since 2008. The review also pointed out the most significant companies listed in London were either financial or representative of the “old economy” rather than the “companies of the future”. 

Lord Hill referred to the flow of post-Brexit business to Amsterdam to make the point that the UK faced “stiff competition as a financial centre not just from the US and Asia, but from elsewhere in Europe”.

The steps represent a win for the London Stock Exchange Group, whose chief executive David Schwimmer has called for a more competitive listing regime. He said it was possible to strike a balance between being competitive and maintaining high corporate governance standards.



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Quorn owner Monde Nissin plans record Manila debut share offer

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The Philippines’ top instant noodle producer and owner of UK meat substitute maker Quorn plans to raise as much as $1.5bn from what would be a record initial public offering in Manila.

Monde Nissin, which produces Lucky Me! instant noodles and SkyFlakes crackers, said on Thursday in an IPO prospectus that it would sell 3.6bn shares at up to 17.50 pesos each to raise a total of up to 63bn pesos ($1.3bn).

The listing could raise as much as $1.5bn if banks on the deal exercise an option to sell 540m additional shares.

At $1.3bn, the IPO would already be the largest by a Philippine company as well as a record debut share offer in Manila.

Monde Nissin said the funds raised would be used to boost production at its flagship noodle brand in the Philippines and to increase capacity at Quorn, which Mondo Nissin acquired in 2015 for £550m.

Quorn has enjoyed strong demand in recent years, bolstered by high-profile domestic hits including a “vegan-friendly” sausage roll sold at bakery chain Greggs. Quorn has also partnered with Liverpool Football Club to offer meat-free meals on match days.

But it has struggled to turn out enough of its fungus-based meat substitute to move substantially beyond its retail customer base, even as competitors such as Beyond Meat have clinched deals with chains including McDonald’s.

“They just don’t have enough supply; in the US [in particular] that’s really held them back,” said one banker on the deal, pointing to the limited rollout of a Quorn-based vegan burger known as “The Impostor” through a partnership with KFC.

The banker said Quorn was “going to attack the US much more aggressively” once it boosted capacity. Assuming sufficient supply, there was a long list of fast food clients who would “adopt Quorn because it’s competitive on the chicken side”, the banker added.

The listing, which is expected to price in April, would be the latest big offering in what bankers say is on pace to be one of the strongest years yet for IPOs in south-east Asia — one of the first regions outside China to be hit by the Covid-19 pandemic, and which is expected to be among the first to emerge from it.

ThaiBev, the drinks group, is poised to list its brewery business in Singapore in a deal expected to raise about $2bn and potentially value the unit at up to $10bn, people familiar with the matter told the Financial Times in January.

The Monde Nissin IPO is a rarity for the Philippines in that the entirety of the base offering will be new shares, rather than being sold off by existing shareholders.

Pre-IPO stakeholders include Betty Ang, the company’s president, and the family of her Indonesian husband — the son of Hidayat Darmono, who founded Indonesia’s dominant biscuit maker Khong Guan.

Both Ang and her extended family keep a notoriously low profile. One banker on the deal described Ang and her relatives as “very, very private”.

Bookrunners on the Monde Nissin IPO include UBS, Citigroup and Credit Suisse.



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Asian bourses look to join Spacs craze despite governance concerns

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The Indonesia Stock Exchange has become the third Asian bourse, after Hong Kong and Singapore, to explore allowing special purpose acquisition vehicles, prompting concerns about investor protection as Wall Street’s mania for the vehicles extends to the region.

Investors have poured almost $3bn into Spacs focused on acquiring Asian companies this year, nearly doubling the amount committed during all of 2020, according to Dealogic.

Last year, there was only one Spac deal involving a company based in an Asian country, and just five successful listings of Asian start-ups via Spacs in the past five years.

The rush for targets from a widening pool of investor cash has prompted concerns among some sponsors about inflated valuations for young companies, where management teams may be unprepared for the regulatory requirements of a US listing.

It has also come despite efforts by Asian bourses to tighten restrictions to block backdoor listings and other deals that avoid the strict independent due diligence required of a traditional IPO.

“Everyone is chasing the same deals,” said Frank Troise, chief executive of SoHo Advisors, a boutique US investment bank. “In some cases, there are 12 to 15 sponsors chasing one target.”

Spacs raise money by listing on a stock exchange and then using the proceeds to take promising private businesses public through reverse takeovers. Shareholders do not know which businesses the vehicles will target and invest based on the records of those sponsoring the Spacs.

Investors poured $100bn into Spacs globally last year. The trend has continued into 2021, with 188 vehicles raising $58bn in the US alone.

Some of Asia’s best-known investors and richest tycoons have waded into the asset class, including Ken Hitchner, who ran Goldman Sachs in Asia Pacific, and Fred Hu, a China private equity veteran.

Richard Li, son of Hong Kong tycoon Li Ka-shing and one of the city’s most prominent businessmen, and Peter Thiel, the US tech investor, have also backed large acquisition vehicles aimed at opportunities in the region.

Many Spacs are targeting south-east Asian tech companies, especially after the meteoric rise of New York-listed Sea, a Singapore-headquartered gaming and ecommerce company that was one of the world’s best-performing stocks last year.

GM020307_21X Global Spac acquisitions

Yet most of south-east Asia’s nascent start-ups are valued at under $3bn, the threshold bankers and investors said was needed to take a company public in the US.

The level of interest is there for south-east Asia but “the amount of actual suitable targets is not”, said Ee Ling Lim, a regional director for venture capital firm 500 Startups.

Only a few of the Asia-focused Spacs launched this year had local sponsors or ones with a history of investing in the region.

These included Provident Acquisition, a $200m Spac focused on Asia launched by south-east Asian fund Provident Growth. The firm has backed Gojek, Indonesia’s biggest start-up, and Traveloka, another one of the country’s four unicorns, or private companies valued at over $1bn.

“There are quite a few unicorns already in south-east Asia and more next generation companies coming through, some of which are ready for public markets,” said Michael Aw, chief executive of Provident Acquisition.

Beyond south-east Asia, some Spacs are targeting larger markets including India, where companies are regarded as more mature. Last week, ReNew Power, one of India’s largest renewable energy groups, unveiled plans to go public in New York through an $8bn deal with a Spac.

The New York Stock Exchange and Nasdaq are the prime venues for such listings. But Asian markets are increasingly looking to grab a share.

Johnson Chui, head of Asia capital markets at Credit Suisse, warned that implementing a Spac issuance framework in Singapore, Hong Kong or Indonesia would require “a lot of education” for stakeholders.

Column chart of Total deal value of Asia-focused Spacs ($bn) showing Global boom in Spacs swings to Asia

Hong Kong has captured tech listings in the region but Singapore and regional bourses including Indonesia have grappled with how to convince homegrown unicorns to list locally.

Allowing Spacs would provide companies with “another alternative for fundraising”, said Pandu Sjahrir, Indonesia Stock Exchange commissioner, adding that companies could then tap local bond and bank lending markets with no currency mismatch.

Indonesia has provided fiscal incentives for companies to pursue domestic listings, with capital gains tax falling to 0.1 per cent from 22 per cent for those that list locally.

However, Asia’s limited history of companies successfully going public through a Spac could weigh on the region’s prospects.

New Frontier Group, an investment firm run by Anthony Leung, Hong Kong’s former financial secretary, merged Chinese private hospital United Family Healthcare with its Spac on the New York Stock Exchange in 2019.

But the company has consistently traded below its $10 a share initial offering price and is set to be taken private by a consortium led by Leung. The proposed buyout would value New Frontier Health at $12 a share.

Sponsors have also come under increasing scrutiny for their lucrative compensation, typically receiving a 20 per cent stake in the company for a nominal sum of $25,000.

“Regulators in Asia spent a lot of time cutting backdoor listings because all sorts of folks loved them for making a quick buck,” said one senior investment banker. “Where it falls apart is if we have unscrupulous sponsors or companies trying to get into this market.”



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