Deal flow keeps equity investors busy

Two US-listed Chinese issuers seek fresh capital, India’s Power Grid hits the market with a billion dollar deal and investor education launches for two more Hong Kong listing candidates.

Hong Kong remains the main scene for the year-end activity in the Asian capital markets, but that doesn’t mean that it is totally quiet elsewhere.

Yesterday, Chinese auto industry information provider Bitauto Holding, which is listed in New York, opened the order books for a follow-on share issue that may raise about $100 million, and real estate internet portal operator Soufun Holding launched a $250 million convertible bond, mirroring similar issues by fellow US-listed Chinese companies Qihoo 360, NQ Mobile, Ctrip and Sina in the past few months.

A day earlier, India’s Power Grid Corp started taking orders for a follow on issue that is looking to raise up to Rs69.59 billion ($1.1 billion) and on Monday bankers started investor education for a commercial property Reit backed by Overseas Union Enterprise that is aiming to raise about S$500 million ($398 million) from a Singapore listing.

That deal won’t actually launch until January, but the target is for it to price before Chinese New Year at the end of January and with Singapore’s drawn-out time table for IPOs that means the process needs to get underway this side of Christmas, a source said.

Also on Monday, the telecom infrastructure fund sponsored by Thailand’s True Corp started the management roadshow for its Bangkok IPO. As reported earlier, the fund is looking to raise up to $1.48 billion from public investors through a fixed priced deal.

On the other hand, Indonesian taxi operator Blue Bird Group has decided to postpone its planned IPO until next year after the regulatory approval is taking longer than expected. According to sources, the family-owned company has been ready to launch its $300 million to $400 million offering since mid-November, but is still lacking the final clearance from the Indonesian regulators.

It is unclear exactly what is holding it up, but since it is no longer technically possible to squeeze in the trading debut this year, the company has decided not to launch until after the holidays.

Foreign investors have been skeptical about Indonesia since August when its currency weakened sharply as a result of a flight from emerging markets but sources say that Blue Bird’s strong fundamentals, leading market position and domestic consumption theme had attracted quite a lot of interest. That’s not to say that investors aren’t price sensitive, however, and most of the anchor demand is said to be in the lower part of the valuation range that was set a couple of weeks ago at 18.6 to 24 times next year’s earnings.

Credit Suisse, Danareksa and UBS are joint global coordinators, while CIMB is a joint bookrunner.

Also experiencing a slight delay is Doosan Infracore. The Korean manufacturer of construction machinery launched a management roadshow on Monday last week for the sale of up to $400 million of global depositary receipts (GDRs) and was planning to take orders from investors over a 24-hour period starting this Tuesday.

However, the company was forced to re-file last week due to what was referred to by one banker as “technical reasons”, which means it cannot open the order books until next week. HSBC, JP Morgan, Morgan Stanley and UBS are joint bookrunners.

So, there should be enough deals to keep investors busy around the region in the final few weeks of the year.

Meanwhile, in Hong Kong, bankers started investor education on Monday for two more Chinese companies that are looking to list before Christmas: Fu Shou Yuan is seeking to become the first funeral services provider to go public in Hong Kong and is hoping to raise about $200 million to fund its high growth business; and China Conch Venture Holdings, the parent company of Hong Kong-listed Anhui Conch Cement, is looking to raise about $500 million.

And that is in addition to the IPOs that are already in the market, including Jintian Pharmaceuticals, M&G Chemicals, Kerry Logistics Network and China Everbright Bank. Also, China Cinda Asset Management and Qinhuangdao Port are both due to price their IPOs this morning. Together, these six deals will absorb at least $5.5 billion of investor cash, which is quite a lot this late in the year.

That said, most international funds are still believed to be underweight China, which may explain the eagerness to participate in Cinda’s IPO. The deal will be the largest new listing in Asia this year but, according to sources, the distressed asset manager has attracted overwhelming demand and will fix the price at the top of the range for a total deal size of $2.45 billion.

Including the other deals around the region and in the US that are in the works for the next few weeks for sure, investors will need to come up with at least $8.7 billion before they close their books on 2013.

Bitauto Holdings
The online provider of prices, specifications, reviews and customer feedback about both new and used cars in China is aiming to raise about $100 million from its follow-on share sale that opened early Wednesday morning (Asia time) and is due to price after the close of US trading on Thursday.

About 46% of the American depositary receipts (ADRs) on offer are backed by new shares, while the rest are existing shares that will be sold by one of its pre-IPO investors, Bertelsmann Asia Investment, which is taking the opportunity to exit the company.  

The stock has rallied 155% since early August, so there is no arguing that this is a good time for Bertelsmann to sell and for the company to raise fresh capital. However, the stock has fallen 7.5% from its record closing high of $34.56 that it reached on November 25 – just after the company first announced plans for the share sale.  

As the follow-on is marketed against a live price, the company has not set a price range, but rather it will price the deal at a discount to Thursday’s close. Based on Wednesday’s closing price of $31.96, it can raise a maximum of $87.9 million from the base deal. However, there is also a 14.9% greenshoe that could bring the total proceeds above $100 million.

The deal comprises approximately 2.75 million ADRs, which account for about 6.3% of the enlarged share capital. Bertelsmann, which is an investment arm of German multimedia group Bertelsmann AG, is selling its entire 3.5% stake. It first bought into Bitauto in 2009 when it invested $12 million.

Citi, Credit Suisse and Morgan Stanley are joint bookrunners.

Fu Shou Yuan
The funeral services group is aiming to raise about $200 million and one source said there is already enough cornerstone and anchor demand from Asia-based long-only accounts to cover the entire deal.

The reason for the optimism is the ageing population in China and the high margins that come with this niche business.

The company will open its order books on Monday next week (December 9) and is expected to fix the price on December 13. The trading debut is scheduled for December 20. Citi and UBS are the joint bookrunners.

China Conch Venture Holdings
This is an investment holding company whose two main assets are Hong Kong- and Shanghai-listed Anhui Conch Cement and Shenzhen-listed Conch Profiles, which it holds through associate company Conch Holdings. A source said 80% of the value of the company will come from the two listed entities.

Conch Venture also provides residual heat power generation solutions and in a preliminary listing document it describes itself as a “provider of energy preservation and environmental protection solutions” and says it plans to diversify its solutions by offering green building materials.

The company is aiming to raise about $500 million and plans to run a simultaneous bookbuilding for institutional and retail investors from December 9 to 12. Deutsche Bank, Goldman Sachs, HSBC and Morgan Stanley are joint bookrunners.


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