Chinese Company’s September Listing Could Be Hong Kong’s Largest in Four Months.
China Huishan Dairy Holdings Co., which produces milk from cows imported from Australia, plans to raise up to US$1.3 billion in what is set to be Hong Kong’s largest initial public offering in four months.
The Chinese milk producer, in which Hong Kong tycoon Cheng Yu-tung was an early investor, has secured three cornerstone investors for the IPO and aims to sell 3.79 billion shares in an indicative price range of 2.28 Hong Kong dollars (30 U.S. cents) to HK$2.67, representing 14.5 to 17 times its forecast 2014 earnings, people familiar with the matter said Monday.
The planned Hong Kong IPO comes at a time when the city’s stock market is just 0.4% higher year to date and foreign milk supplies in China — once the darling of domestic consumers — are suffering from reputations of weak quality. Even so, investors are keen on the Chinese milk producer that relies on imported cows.
China Huishan’s price range represents a discount to other Chinese dairy firms listed in Hong Kong, even as the benchmark Hang Seng Index has strengthened in the last couple of weeks, gaining 5% since Aug. 28. China Mengniu Dairy Co.2319.HK +3.54% is trading at 21.7 times forecast 2014 earnings, according to FactSet.
Cornerstone investors in China Huishan’s IPO include Norway’s central bank Norges Bank and the private-equity arm of Chinese state-owned food industry giant Cofco Group, the people said. The total investment amount from the three cornerstone investors wasn’t immediately clear.
Cornerstone investors, who are guaranteed large allotments in an initial public offering in exchange for agreeing to hold the shares a certain length of time, give other investors confidence in a deal.
China Huishan will start taking orders from institutional investors Tuesday and will list in Hong Kong in September, the people said. If the Chinese company’s planned IPO comes to fruition, it will be Hong Kong’s third billion-dollar IPO this year and the first sizable offering in the city since May.
In May, Sinopec Engineering (Group) 2386.HK +1.89% Co., a unit of oil giant China Petrochemical Corp., or Sinopec Group, raised $1.8 billion and securities firm China Galaxy Securities Co. 6881.HK +6.00% raised $1.1 billion. The listings sparked hopes for a recovery in what was once the world’s top IPO destination until 2012, when New York became the top venue for new listings. But the spurt of activity in Hong Kong four months ago proved to be short-lived.
New listings in Hong Kong this year have underperformed the market. China’s dairy industry, long under pressure to increase production, has yet to shake off doubts about quality after domestically produced milk powder contaminated with melamine killed six infants and sickened hundreds of thousands of others five years ago.
China Huishan wasn’t among the companies whose products were found to be tainted with the industrial chemical, but Chinese consumers became skeptical about domestically produced milk powder. To allay fears about the quality of its milk, Huishan has been importing heifers from Australia and grass from California.
But recently, scrutiny in China has shifted to foreign milk supplies, including those from New Zealand, a major dairy supplier to the country.
In early August, New Zealand’s largest milk-powder exporter, Fonterra Cooperative Group Ltd., said some infant formula ingredients it exported to China contained potentially hazardous bacteria. Fonterra recalled products and apologized to Chinese consumers for the problem.
A few weeks later, Chinese authorities suspended and seized imports of milk powderfrom New Zealand’s Westland Milk Products, after the company said some of its shipments to China contained higher-than-normal nitrate levels. Excess nitrate can impair the delivery of oxygen in blood.
Two other companies are seeking to raise funds from IPOs in Hong Kong. Tenwow International Holdings Ltd., a Chinese maker of packaged food and beverage products that has hired Hong Kong pop singer Jacky Cheung Hok-yau to endorse its products, is planning to raise up to US$203 million, while China Cinda Asset Management Co., which buys bad loans from the country’s banks, is looking to raise around US$2 billion in the fourth quarter.
Source: WSJ
China Huishan Dairy Holdings Co., which produces milk from cows imported from Australia, plans to raise up to US$1.3 billion in what is set to be Hong Kong’s largest initial public offering in four months.
The Chinese milk producer, in which Hong Kong tycoon Cheng Yu-tung was an early investor, has secured three cornerstone investors for the IPO and aims to sell 3.79 billion shares in an indicative price range of 2.28 Hong Kong dollars (30 U.S. cents) to HK$2.67, representing 14.5 to 17 times its forecast 2014 earnings, people familiar with the matter said Monday.
The planned Hong Kong IPO comes at a time when the city’s stock market is just 0.4% higher year to date and foreign milk supplies in China — once the darling of domestic consumers — are suffering from reputations of weak quality. Even so, investors are keen on the Chinese milk producer that relies on imported cows.
China Huishan’s price range represents a discount to other Chinese dairy firms listed in Hong Kong, even as the benchmark Hang Seng Index has strengthened in the last couple of weeks, gaining 5% since Aug. 28. China Mengniu Dairy Co.2319.HK +3.54% is trading at 21.7 times forecast 2014 earnings, according to FactSet.
Cornerstone investors in China Huishan’s IPO include Norway’s central bank Norges Bank and the private-equity arm of Chinese state-owned food industry giant Cofco Group, the people said. The total investment amount from the three cornerstone investors wasn’t immediately clear.
Cornerstone investors, who are guaranteed large allotments in an initial public offering in exchange for agreeing to hold the shares a certain length of time, give other investors confidence in a deal.
China Huishan will start taking orders from institutional investors Tuesday and will list in Hong Kong in September, the people said. If the Chinese company’s planned IPO comes to fruition, it will be Hong Kong’s third billion-dollar IPO this year and the first sizable offering in the city since May.
In May, Sinopec Engineering (Group) 2386.HK +1.89% Co., a unit of oil giant China Petrochemical Corp., or Sinopec Group, raised $1.8 billion and securities firm China Galaxy Securities Co. 6881.HK +6.00% raised $1.1 billion. The listings sparked hopes for a recovery in what was once the world’s top IPO destination until 2012, when New York became the top venue for new listings. But the spurt of activity in Hong Kong four months ago proved to be short-lived.
New listings in Hong Kong this year have underperformed the market. China’s dairy industry, long under pressure to increase production, has yet to shake off doubts about quality after domestically produced milk powder contaminated with melamine killed six infants and sickened hundreds of thousands of others five years ago.
China Huishan wasn’t among the companies whose products were found to be tainted with the industrial chemical, but Chinese consumers became skeptical about domestically produced milk powder. To allay fears about the quality of its milk, Huishan has been importing heifers from Australia and grass from California.
But recently, scrutiny in China has shifted to foreign milk supplies, including those from New Zealand, a major dairy supplier to the country.
In early August, New Zealand’s largest milk-powder exporter, Fonterra Cooperative Group Ltd., said some infant formula ingredients it exported to China contained potentially hazardous bacteria. Fonterra recalled products and apologized to Chinese consumers for the problem.
A few weeks later, Chinese authorities suspended and seized imports of milk powderfrom New Zealand’s Westland Milk Products, after the company said some of its shipments to China contained higher-than-normal nitrate levels. Excess nitrate can impair the delivery of oxygen in blood.
Two other companies are seeking to raise funds from IPOs in Hong Kong. Tenwow International Holdings Ltd., a Chinese maker of packaged food and beverage products that has hired Hong Kong pop singer Jacky Cheung Hok-yau to endorse its products, is planning to raise up to US$203 million, while China Cinda Asset Management Co., which buys bad loans from the country’s banks, is looking to raise around US$2 billion in the fourth quarter.
Source: WSJ
