Morgan Stanley Left With Almost Half of TDC Shares From Sale

By Zijing Wu, Alexis Xydias and Elisa Martinuzzi – Feb 15, 2012

Morgan Stanley (MS) was left with almost half the $982 million in TDC A/S (TDC) shares it tried to sell on behalf of the Danish phone company’s private equity owners this week, two people with direct knowledge of the transaction said.

Morgan Stanley holds about 59 million shares, or 7.2 percent of the company’s stock, TDC said in an announcement today. Almost all of the bank’s stake was from shares left over from the block sale after a 4 percent discount failed to lure enough investors, said the people, who declined to be identified because the deal was private.

In a block sale, the underwriter typically buys shares from the selling shareholders before distributing them to investors, rather than simply acting as a broker matching buyers and sellers. Investment banks aim to profit by charging investors more than what they paid for the shares.

“Morgan Stanley will clearly need to shift this off the books, and the decision they’ll have to make is how long to tie up capital for, or whether to sell it and take a loss,” said Christopher Wheeler, a banking analyst at Mediobanca SpA (MB) with a “neutral” rating on the stock. “There’s pressure to get revenue, particularly in equity capital markets.”

Brian Buckley, a spokesman for Morgan Stanley, declined to comment.
Second-Largest Shareholder

Morgan Stanley is now TDC’s second-largest shareholder, surpassing Government of Singapore Investment Corporation Pte Ltd., which had 5 percent of the shares at the end of 2011, according to TDC’s annual report. The company’s largest shareholder is still NTC Holding GP & Cie. SCA, the consortium of TDC’s private equity owners, which controls about 43 percent, according to data compiled by Bloomberg.

“We will treat Morgan Stanley the same way that we treat all our shareholders,” Dennis Callesen, a spokesman for TDC, said by phone, declining to comment further on the sale.

NTC sold about 128 million shares at 43.40 kroner each in a block sale that began Feb. 13, at the low end of the range, people with knowledge of the transaction said yesterday. Morgan Stanley was the sole bookrunner for the sale, according to terms for the transaction obtained by Bloomberg News.

TDC shares fell 0.9 percent today to 42.90 kroner apiece, after a 4.3 percent drop yesterday. The shares have fallen 6.9 percent this year, compared with an 8 percent increase for the Stoxx Europe 600 Index. Morgan Stanley’s stake, valued at about $455 million at the offer price, had fallen to about $445 million today.

“The overhang will continue,” David Aubert, analyst at DNB Bank ASA in Oslo, said in a phone interview. “Now that Morgan Stanley has a large amount of shares, it adds to what NTC holds. The overhang and the discount is something that is not out of the shares just yet.”

Aubert has a “hold” recommendation on TDC with a price estimate of 47 kroner per share.

“Risk-taking is still ingrained in the culture of investment banking,” said Giorgio Questa, a finance professor at Cass Business School in London. Banks typically seek to sell the shares they’re left with gradually on the markets to reduce their exposure, said Questa, a former banker.

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