ESR Upsizes IPO to HK$12.6B as Investors Warm to Warehouses

ESR Cayman has opted to upsize its IPO by 15 percent, according to news reports over the weekend, as investor demand for shares in the warehouse developer and fund manager exceeds the company’s original targets.

With the Warburg Pincus-backed company having wrapped up a roadshow in New York on Friday, ESR now expects to raise HK$12.6 billion ($1.6 billion) through its share offering, according to a report by Bloomberg on Friday – up from the HK$10.98 billion it had targetted in a prospectus filed earlier this month.

The super-sizing was made possible when ESR opted to exercise an option, spelled out in the offering document, to increase the number of shares being sold by 15 percent

The stronger than expected results for the share offering, which is set to be Hong Kong’s second largest of 2019, follows just over four months after ESR had been forced to scratch an earlier attempt at its IPO due to challenging market conditions.

Shares Price at Mid-Point of Range

ESR and its lead advisers on the share sale, Morgan Stanley and Deutsche Bank, agreed late Friday to price the company’s stock at HK$16.80 per share, according to an account in Reuters – the mid-point of the indicative pricing spelled out earlier.

With operations in mainland China, Japan, Korea, India, Singapore and Australia, ESR bills itself as the largest logistics real estate platform focusing solely on the Asia Pacific market.

With the retail portion of the share offering already having commenced in Hong Kong last week, trading in the company’s stock is expected to commence on the HKEX on 1 November.

Sources familiar with the share sale indicated that ESR’s order book for the share offering was multiple times oversubscribed, according to the Reuters account, with allocations to investors already being carried out.

Improving Financials Bring in Investors

The warehouse investment platform’s haul from its IPO is now nearly 23 percent more than the target that it had set when it first tried to execute the share sale in June, with ESR’s half-year financial results having helped attract major institutional investors.

OMERS Administration Corporation, which manages the Ontario Municipal Employees Retirement System pension fund, signed up as a cornerstone investor in the offering, taking a 9 percent slice of the shares, according to an earlier statement from ESR.

During the period since mid-June, when the earlier share sale attempt was withdrawn, ESR, which manages $20.2 billion in warehouses, land and other assets across Asia Pacific, released its interim financial report showing that income from the company’s operations rose to $155.76 million during the first six months of 2019. That total represented an almost 40 percent increase from the $93.69 million it recorded during the same period last year.

Citigroup Global Markets Asia, Credit Suisse (Hong Kong) and Goldman Sachs (Asia) serving as joint global coordinators for the share sale, alongside Morgan Stanley and Deutsche Bank, while CLSA and Deutsche Securities Ltd served as joint sponsors.