STANDARD Chartered yesterday confirmed it will launch a £3.3bn rights issue, with major investor Temasek already saying it will take up its full allotment of shares.
Existing shareholders will be offered the chance to buy one new share at £12.80 for every eight shares they hold – a 33 per cent discount to the pre-announcement price.
The bank denied suggestions the rights issue will create a war chest which will be spent on a major Asian acquisition.
It said it is instead preparing for new Basel III rules that will increase banks’ capital requirements. They will need to have a core Tier 1 capital ratio – the ratio between capital equity and risk weighted assets – of at least seven per cent.
Standard Chartered already has a ratio of nine per cent, which will rise to 11 per cent after the rights issue. However, the bank says new rules will re-weight of some of its assets, slashing a percentage point from this and local jurisdictions could require an additional 2.5 per cent.
Chief executive Peter Sands said the new funds will allow the bank to “continue to seize opportunities across Asia, Africa and the Middle East.”
He added it will “safeguard the bank’s ability to take advantage of the opportunities in our markets while meeting the anticipated changes in the regulatory world.” He said the new capital rules could have constrained its asset growth unless new cash was raised. A source close to the bank dismissed suggestions it was responding to a possible bid by JP Morgan.
Standard Chartered recently posted record first half profits of $3.12bn (£1.97bn).
High-flying equities banker Jonathan Wilcox is heading up the team advising on the rights issue at JP Morgan.
It is perhaps easier to spot the deals he hasn’t advised on over the last two years. He is no stranger to rights issues. Earlier this year he advised Prudential on its failed plan raise £13bn in new funds from its shareholders, as part of its bid to buy AIA from its US owners in a $35.5bn deal.
He had more success working alongside fellow JP Morgan bankers Edmund Byers and Charles Pretzlik advising Balfour Beatty in its share placement last year.
Also in 2009 he advised Rio Tinto, Great Portland Estates and Lonmin on their rights issues.
Wilcox has also worked on a number of big IPOs, advising Jupiter on its pricing in the lead up to its £750m flotation this summer. Also working on the float for JP Morgan were Tim Wise and Edward Squire.
Before this he advised New Look on its flotation, which was later pulled.
Legal adviser on the deal was Nilufer von Bismarck from Slaughter & May. She advises on a host of corporate deals including mergers and acquisitions, joint ventures and IPOs.