Bloomberg News

Citic Securities Hong Kong Sale Said to Raise $1.7 Billion

September 28, 2011

(Updates with Shanghai share price in fifth paragraph)

Sept. 28 (Bloomberg) -- Citic Securities Co. raised HK$13.2 billion ($1.7 billion) in Hong Kong’s biggest public stock offering in more than three months, two people with knowledge of the matter said.

China’s biggest brokerage by market value sold 995.3 million shares at HK$13.30 apiece, said the people, who declined to be identified because no announcement has been made. The stock was initially offered at HK$12.84 to HK$15.20 before banks managing the sale raised the low end of the range to HK$13.30, they said.

Citic Securities’ sale is the biggest in Hong Kong since Italian fashion retailer Prada SpA raised $2.5 billion in June. The benchmark Hang Seng Index is down 20 percent since June and the value of initial public offerings in the city has dropped 64 percent from the previous quarter amid Europe’s escalating sovereign debt crisis. Other companies may struggle to find investors for new stock, fund manager Victoria Mio said.

“They put money in this one because Citic is a leader in one of the growing brokerage markets where the capital market is continuing to open up,” said Mio, a Hong Kong-based money manager at Robeco NV, whose fund subscribed for shares in the offering. “With a lot of uncertainties surrounding EU countries, investors are reluctant to put their money to work.”

Citic Securities fell 2.5 percent to 11.52 yuan in Shanghai trading today. The Hong Kong sale price is a 5.4 percent discount to that level.

Cornerstone Backing

The final price values Citic Securities at 1.28 times estimated 2011 book value and 8.95 times forecast 2011 earnings, one of the people said. Sukyi Yau, a Hong Kong-based outside spokeswoman for Citic Securities, declined to comment on the final pricing.

Citic Securities sold $850 million of shares to so-called cornerstone investors including Singapore’s Temasek Holdings Pte and Kuwait Investment Authority, according to a prospectus released on Sept. 21. That helped shore up support for the sale, said Philippe Espinasse, former co-head of Asian equity capital markets at Nomura International Hong Kong Ltd.

“They had a pretty significant cornerstone investment tranche when coming to market,” Espinasse said on Bloomberg Television today. “Half of the deal was already packed away by the time they started book-building.”

Cornerstone investors are guaranteed shares in the offering in return for a pledge not to sell their stock immediately. Individual investors accounted for just 0.4 percent of the sale, according to a term sheet obtained by Bloomberg News today. Individuals were offered as much as 5 percent of the total shares sold.

Companies have raised $3.9 billion from IPOs in Hong Kong so far in the third quarter, down from $10.7 billion in the second quarter, data compiled by Bloomberg show. Citic Securities’ sale comes just days after XCMG Construction Machinery Co. scrapped plans for a $1.1 billion Hong Kong offering and rival construction equipment maker Sany Heavy Industry Co. delayed a $3.3 billion sale.

--Editors: Mohammed Hadi, James Gunsalus

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net


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