The institutional tranche attracted over 200 orders, leaving it 56 times covered post-clawback. The clawback, which increased the retail tranche from 10% to 50%, was triggered by strong demand from local Hong Kong investors. When the public offer closed last Friday, retail investors had subscribed to 115 times the shares originally available to them.
A source close to the deal says the book was fully covered on the first day of the roadshow, with approximately 30% of the demand coming from corporate investors and high-net-worth individuals.
ôThe initial momentum was driven by tycoons and high-net-worth individuals. A Hong Kong-listed blue-chip company also came in the book on the last day of the roadshow,ö says a source.
There was little price sensitivity with the one-on-one hit rate of the roadshow close to 80%. Nearly 60% of the demand came from Asia including the Middle East, while Europe accounted for a quarter and the US took up the remaining 15%.
Investors like the company as it has built a strong brand for itself over a short period of time, and is well positioned in the high-end toilet paper market, according to the source. The market is fast-growing as well, thanks to ChinaÆs increasing population and rising income.
Vinda priced its offering at HK$3.68, which marks the top of an indicative range starting from HK$3.10. The price values the company at around 30 times its 2006 earnings - a discount compared with its close competitor Hengan International GroupÆs 43 times. Hengan traded up 9% last week to a close of HK$27.80 on Friday.
The deal was brought to the market at a time when several other companies were looking for fresh capital. Anta Sports Products, a sportswear company aiming to raise up to $406 million from its IPO, closed its public offering on the same day as Vinda, while Chinese conglomerate Fosun International and two Chinese retailers, Times Limited and New World Department Store are still on the road trying to raise a combined $1.8 billion from their IPOs.
Vinda manufactures sanitary paper products, including toilet paper, paper handkerchiefs, facial tissue paper and paper napkins and has a sales network that covers 29 provinces in China. It also exports its products to places including Hong Kong, Macau, Australia and New Zealand. Exports accounted for 20.8% of its total sales last year. In 2006, 61.5% of its revenues came from the sales of toilet paper and 11.5% came from paper handkerchiefs.
The company offered 300 million shares, or 35% of its enlarged capital, of which roughly 74% were new shares. The existing shares came from Cathay Paper and Lee Der Fung, who will see their ownership fall to 9.9% and 4.9% respectively after the IPO. A 15% greenshoe could further increase the deal size to $163 million.
There were no cornerstone investors in the deal, but SwedenÆs SCA, EuropeÆs largest and the worldÆs third largest supplier of tissue paper, bought 20% of the company in March at a price of HK$2.84 per share. Its share of the company will be diluted to 14.85% after the offering. Alongside SCA, Cathay Paper and Lee Der Fung, the Vinda management will hold 31.7% and Merrill Lynch will hold 3.7% of the company post-IPO. Merrill Lynch was also the sole bookrunner for the offering.
Most of the net proceeds will be used to increase production capacity, but part of the money will also go towards the repayment of short-term loans. The trading debut is scheduled for July 10.
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