Five Kier underwriters sell stick
Five banks left holding 17.3% of struggling UK construction and engineering business Kier Group, acted quickly to dispose of their holding through an accelerated bookbuild on Thursday afternoon.
The large stick position resulted from shareholders subscribing to just 37.66% of Kier’s fully-underwritten £264m rights issue and the failure to complete as rump trade as shares were trading below the rights issue price.
The low take-up was inevitable as shares traded below the 409p rights issue price for much of the subscription period. Joint bookrunners Citigroup, HSBC, Numis, Peel Hunt and Santander were left with 17.3% of Kier, having previously sub-underwritten part of the deal to institutional investors.
They sold the stake later the same day, with the five entrusting an accelerated bookbuild to sell the entire 28.1m share stick to Numis and Peel Hunt.
Initial price guidance of 360p-375p per share was given at the 1pm launch and compares to a rights issue price of 409p per share.
Shares began weakly on Thursday with an intraday low of 334.88p shortly after trading began and were trading around 356p just ahead of the ABB launch, but immediately traded up and had reached 385p by 4:20pm, the same level as Wednesday’s close.
A result was posted just before 4.30pm, with the whole stick sold at 360p per share, representing a discount of around 6.5% to the current share price. Proceeds from the ABB were £101.2m, versus the £114.9m underwriters paid for the shares.
The total fee pot for underwriters was £5.8m from a base 2.2% fee, though some will have been passed on in sub-underwriting fees. There is also a 0.3% incentive fee.
Shares closed on Thursday at 391.2p.
Kier’s share price plunged 48.8% between November 29, the day before the capital increase was announced, and December 19, when subscription for the new shares closed.
“This was more or less expected because it’s been trading around or below issue for some of the rights issue,” said one banker working on the deal. “The broader market backdrop has been weak so that also didn’t help. Take-up was low, everyone knew they had a chance at the rump, or even lower prices in the market.”
Of the 64.5m new shares issued on a 33-for-50 basis, shareholders subscribed to 24.3m. Existing shareholders representing 32% of the share capital indicated at launch that they would subscribe for their rights.
Banks quickly abandoned the prospect of successfully selling the rump of 40.2m shares, informing Kier that finding new investors at 409p was unlikely.
Sub-underwriting agreements amounting to 12.08m shares with institutional investors means the banks were left with 28.1m shares on their books.
Rothschild advised the company
Kier raised the cash to reinforce its position in growing markets, speed up debt reduction and strengthen its balance shee amid a tighter credit environment and stricter tender pre-qualification requirements.
The UK outsourcing sector has struggled this year, after the collapse of government contracter Carillion and Interserve’s cry for a rescue deal have left investors reeling.