More Update on Maxis ......

OSK IB rejects 1.5m Maxis shares allocation

Written by Yong Yen Nie

Tuesday, 17 November 2009 11:49

KUALA LUMPUR: OSK Investment Bank Bhd (OSK IB) has rejected the entire allocation of 1.5 million initial public offering (IPO) shares in the soon-to-be listed telecommunications company Maxis Bhd given that it was too small and “simply not meaningful”, according to documents obtained by The Edge Financial Daily. It is believed that OSK IB had declined to take up its allocated size last week after its appeal to the joint bookrunners for a larger allocation of Maxis shares was rejected as there were no extra shares available. “As an investment bank, OSK cannot discuss the above matter based on Bafia (Banking & Financial Institutions Act) guidelines,” OSK IB said in an email reply when contacted by The Edge Financial Daily for its response. The investment bank’s decision had emerged amid news reports that several institutional investors, which included funds, were not satisfied with the small allocation of Maxis shares they were getting for their clients. OSK IB is believed to have told its dealers that the size of the allocation would result in a very small number of shares being allocated to each of its clients that had submitted their subscriptions through the investment bank and was “simply not meaningful” measured against the transaction cost. It is also learnt that the allocated size would also result in some of its clients getting odd lots, and OSK IB will refund the deposit paid by clients beginning last Thursday. At Maxis’ offer price for institutional investors of RM5, OSK IB’s allocated consideration would have amounted to a total of RM7.58 million, including brokerage fees. TA Investment Management Bhd chief investment officer Choo Swee Kee had told The Edge Financial Daily last week that its fund was allocated only 5% of the number of shares they asked for. The quantum of Maxis shares allocation that OSK IB had asked for is not known. Based on Maxis’ prospectus, the number of shares allocated to institutional investors stood at 2.04 billion shares, out of which 626.08 million shares were earmarked for cornerstone investors such as Employees Provident Fund, Permodalan Nasional Bhd, Kumpulan Wang Persaraan (KWAP) and Fidelity Funds-Malaysia Fund. It is believed that OSK IB was told that the six joint bookrunners had to make a collective decision on the share allocation to achieve an optimal blend of foreign and local institutional investors, given that the deal had drawn high interest from global funds, including those that had dropped Malaysia off their portfolio previously. Industry sources said it was unlikely for Maxis to enlarge the share allocation to OSK IB, as the Maxis listing date approaches on Nov 19. “They will have to go through the regulators if they want to change the share allocation, which is not feasible to do at this point of time,” a source said. They said OSK IB was also not expected to acquire Maxis shares via the open market post listing, unless the price of the counter fell below RM5. News reports of several local investment funds and brokers being unhappy over the small share allocation in Maxis they received had been circulating since last week. Kenanga Investment Bank Bhd senior director equities James Lau had reportedly said his clients were disappointed at only receiving a small allocation, without revealing the share allocation it received. Lau also reportedly said he had hoped for greater transparency in the share allocation process so that investors “don’t feel overtly disappointed by the small allocation”. Interestingly, OSK-UOB Investment Unit Trust Management Bhd chief investment officer Jason Chong was reportedly “happy” with the amount of shares it was allocated. OSK-UOB is a joint venture between OSK Group and UOB Group. Maxis had said its institutional share offering, which did not include shares allocated for cornerstone investors and bumiputera investors approved by the Ministry of International Trade and Industries (Miti), was oversubscribed by 3.7 times. The final shares offered through the bookbuilding exercise under the institutional offering would raise RM5.3 billion, of which over US$800 million (RM2.69 billion) would be from foreign institutional investors, Maxis said. Maxis’ IPO raised RM11.2 billion, making it the largest IPO in Southeast Asia and the biggest telecommunications IPO in Asia- Pacific. Upon its listing on Thursday, it would become Bursa Malaysia’s fourth largest company based on closing prices of stocks listed on the local bourse as at Nov 9, 2009.