UPDATE 2-Malaysia's Felda prices $3.1 bln IPO near top end
* Felda prices IPO at 4.55 ringgit/share, near top
* IPO benefits from strong domestic investor demand
* World's second-biggest this year after Facebook
* IPO to propel Kuala Lumpur to top Asia IPO destination (Adds final IPO pricing)
By Yantoultra Ngui and Elzio Barreto
HONG KONG/KUALA LUMPUR, June 13 (Reuters) - Malaysia's Felda Global Ventures Holdings, the world's third-largest palm oil company by acreage, pr iced its $3.1 billion IPO late on Wednesday near the top of an ind icative range, buoyed by strong demand from domestic investors to help it counter a recent global trend of failed listings.
The world's second-biggest initial public offering this year behind Facebook Inc's $16 billion offering will put Kuala Lumpur on par with Shenzhen as the main IPO destination in Asia Pacific, leaving behind Hong Kong which grossed the highest IPO proceeds in the world in both 2010 and 2011.
The company priced the IPO at 4.55 ringgit a share, near the top of a 4.00-4.65 ringgit indicative range, said three sources with direct knowledge of the deal who were not authorized to speak publicly on the matter. Felda offered 2.19 billion shares putting the deal at 9.96 billion Malaysian ringgit ($3.13 billion).
Felda priced its offering as Malaysian stocks have underperformed peer markets in Southeast Asia. The benchmark index is up 3 percent this year, lagging Vietnam's near-22 percent gain, the Philippines' 16 percent rise and Thailand's 13 percent increase.
Yet two IPOs in Malaysia were among the top-10 best performing offerings in 2011. Sugar refiner MSM Malaysia Holdings, which raised $270 million in June and is controlled by Felda, is up 50 percent, while offshore oil and gas service provider Bumi Armada is up by more than a third since its July IPO.
And, feeding the optimism ahead of the Felda share sale, Gas Malaysia jumped on its market debut on Monday and has gained more than 10 percent.
The IPO underscores how Malaysia's equity market has been partially insulated from global volatility as it is dominated by local investors and a large domestic pension fund system.
"There's a large pool of institutional money in Malaysia looking for investment opportunities," said Singapore-based John Doyle, chief investment officer for equities at UOB Asset Management. "You're finding a fair bit of demand for new issues coming from domestic institutions and that's the single biggest differentiator."
There is also significant political capital invested in state-owned Felda's share sale, which is set to deliver a windfall totalling more than $500 million to tens of thousands of small landholders in what is likely to be an election year.
Demand for Felda shares from institutional investors was more than 30 times larger than the amount of shares on offer, excluding shares set aside for cornerstone investors, Thomson Reuters publication IFR reported.
The company received enough orders to price at the top of the indicative range, but F elda executives and its bankers decided to price slightly below the top of the range to "leave some money on the table," one of the sources said. The company will likely exercise a greenshoe option to meet additional demand for the IPO, though a final decision will depend on the performance of the shares after listing, the source added.
A successful Felda IPO will end a drought in Asia Pacific offerings, where deal volumes, including follow-on, have almost halved this year to $67.8 billion, Thomson Reuters data show.
About a fifth of the proceeds will be handed out to 112,635 landholders, or settlers, giving them each a windfall of nearly $5,000 - more than the annual minimum salary - and adding to the economic feel-good factor the ruling National Front coalition is trying to generate ahead of an election expected this year.
CIMB Investment Bank, Maybank Investment Bank and Morgan Stanley are joint global coordinators for the Felda listing, with JPMorgan and Deutsche Bank also acting as joint bookrunners.
Malaysia's upbeat IPO mood contrasts sharply to a tumble in equity capital market activity and pulled deals in Hong Kong, London and elsewhere. Late last month, London luxury jeweller Graff Diamonds ditched a $1 billion IPO in Hong Kong and motor sport racing company Formula One delayed a Singapore offering worth up to $3 billion.
Hong Kong IPOs have had their slowest start in about four years, with offerings down 85 percent in January-May. Last week, Chinese coal producer Inner Mongolia Yitai Coal decided not to start bookbuilding for a Hong Kong deal.
But several multi-billion dollar offers from Asian companies are set to launch later this year, including IHH Healthcare Bhd's $2 billion IPO, also in Malaysia.
The Felda deal will set Kuala Lumpur as Asia's top IPO destination, overtaking Shenzhen's ChiNext board of high-tech start-ups that has seen $3.4 billion of new listings so far in 2012. The Malaysian exchange had five IPOs so far this year that raised a combined $348 million, data showed.
Other large deals in the Philippines and Thailand underscore the significance bankers and investors are increasingly placing in Southeast Asia as markets crumble elsewhere.
"Southeast Asia is emerging as an important destination for IPOs, not just for domestic leaders, but increasingly as a listing venue for leading global companies," said David Aronovitch, a managing director and co-head of investment banking for Southeast Asia at Morgan Stanley.
"There are several world-class companies across diverse industry sectors seeking to go public in Singapore, Malaysia and Indonesia in 2012. We see this trend increasing going forward." ($1 = 3.181 Malaysian Ringgit) (Additional reporting by Saeed Azhar and S. Anuradha in SINGAPORE, Writing by Elzio Barreto; Editing by Ian Geoghegan and Jon Loades-Carter)
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