Bloomberg News

Sun Art Plans to Raise Up to HK$8.2 Billion in Hong Kong IPO

July 03, 2011

July 4 (Bloomberg) -- Sun Art Retail Group Ltd., China’s largest hypermarket operator, may raise as much as HK$8.2 billion ($1.1 billion) in a Hong Kong initial public offering.

The Shanghai-based company will sell 1.14 billion new shares for HK$5.65 to HK$7.20 each, according to a prospectus distributed to reporters today. Half of the IPO proceeds will be spent opening new stores and the rest will mainly be used to pay back loans and refurbish existing properties.

“We will strive to further strengthen our market position by continuously expanding our retail network,” Bruno Mercier, chief executive officer of Sun Art, said in a statement.

At least six companies withdrew or postponed Hong Kong initial offerings in June as the benchmark Hang Seng Index sank to a nine-month low. Prada SpA and Samsonite International SA, which both started trading in Hong Kong last month, sold shares at the low end of the price range.

Sun Art aims to benefit from rising consumer spending in China as the nation’s economy is forecast to expand 9.5 percent in 2011, according to the median estimate of 11 economists tracked by Bloomberg. Retail-sales growth slowed to 16.9 percent in May, less than the average of the past five years, the Beijing-based statistics bureau said on June 14.

China’s hypermarket industry, large retailers that sell groceries and goods from clothing to household appliances, may grow at 15 percent compounded annually in the next five years, Mercier said at the press conference. It has expanded at a 19 percent rate in the previous five years.

Hypermarket Operators

Sun Art is the largest hypermarket operator in China with 12 percent market share in 2010, followed by Wal-Mart Stores Inc., China Resources Enterprise Co. Ltd., and Carrefour SA, according to the prospectus, which cites estimates from Euromonitor.

Sun Art reported 56.2 billion yuan ($8.7 billion) in net sales last year and 1 billion yuan in profit attributable to shareholders, according to the prospectus. The company operates 197 outlets in China under brand names Auchan and RT-Mart, based on the statement. It also has 51 locations under development that are expected to start operating by next year.

Shareholders include Groupe Auchan SA in France, Ruentex Development Co. and Ruentex Industries Ltd., both listed in Taiwan. Sun Art shares will start trading on the stock exchange on July 15.

Citigroup Inc., HSBC Holdings Plc and UBS AG are managing Sun Art’s offering as global coordinators. BNP Paribas SA, China International Capital Corp., Goldman Sachs Group Inc. and Morgan Stanley are also arranging the IPO as joint bookrunners.

--Editors: Kristen Hallam, Fergal O’Brien

To contact the reporters on this story: Michelle Yun in Hong Kong at myun9@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net


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