China International Capital Corp, the country’s first joint venture investment bank, could end up raising 28% less than what it has targeted in its long awaited initial public offering in Hong Kong, after finalising details for the sale late Friday.
One source told FinanceAsia the investment bank is set to raise a minimum of HK$5.6 billion ($719 million) from the share sale based on an indicative price range of HK$9.12 – HK$10.28 per share, implying a 28% cut over its initial fundraising target of $1 billion.
At the highest end of the price range CICC could raise $811 million.
Syndicate bankers appear to have structured the deal with close reference to mainland brokerage firms listed in Hong Kong to avoid large discrepancies in terms of valuation.
Should CICC be priced at the highest end of the range it will be valued at 1.3 times consensus estimated 2015 book value, which is roughly in line with the secondary trading levels of large Chinese brokerages including Huatai Securities and GF Securities.
Huatai and GF Securities closed Thursday at 1.31 times and 1.29 times their respective book value this year.
Any pricing below the top of the price range will imply a discount over its rivals, which is badly needed against a backdrop of fragile market sentiment. At the bottom end of the range CICC will be valued at 1.2 times 2015 price-to-book.
CICC appears to have made a prudent decision by not launching a deal immediately after getting stock exchange approval in late September, when the benchmark Hang Seng Index hit its lowest point of the year. The Index has since rebounded 11% from that level.
According to information seen by FinanceAsia, the Chinese investment banking giant plans to sell 611 million shares, or approximately 27.5% of the company’s enlarged share capital. They include 556 million new shares and 55 million existing shares sold by state investment company Central Huijin.
Central Huijin’s shareholding will reduce from 43.17% to 29.9% after the IPO, assuming the 15% greenshoe option is not exercised.
Institutional bookbuild and management roadshow is set to start on October 26 and the deal will be priced on October 30. The company is set to start trading on November 9.
CICC and ABC International are joint sponsors of the deal.
This article was amended on October 26 to show updated pricing information.