Fosun IPO set to broaden Hong Kong equity markets

Acquisitive conglomerate launches an IPO for Israel-based Sisram Medical, a company it acquired four years ago during the early stage of China’s overseas M&A boom.

Fosun Group is on course to plant a new marker for Hong Kong’s equity markets following the launch of an initial public offering in Sisram Medical this Thursday.

The IPO, which will raise up to HK$1.35 billion ($174 million), is the first example of a Chinese company listing one of its offshore assets back home. It will also represent the first Israeli company to list in Hong Kong.

Sisram Medical is a special purpose vehicle established in 2013 after Fosun’s $240 million acquisition of Alma Lasers, an Israel-based developer of laser devices for aesthetic and medical use.

As FinanceAsia has previously discussed, the Hong Kong IPO demonstrates how China’s aggressive outbound M&A could benefit local stock markets.

As such, Sisram Medical should  offer the Territory's equity markets a much-needed boost given the dearth of foreign listings in recent years. And Hong Kong is a natural destination for such assets since China’s domestic stock markets currently only allow locally registered companies to list.

Some might argue whether Sisram Medical really is a foreign company given its Chinese ownership. But there is little doubt the business itself is far removed from the typical Chinese business floated in Hong Kong of late.

In fact, Sisram Medical has little correlation with China or Hong Kong at all. The company counts the US, Canada, Germany and Austria among its biggest markets, with Asia accounting for just 11.4% of its sales last year.

It also has no plans to expand in China any more than other markets. According to its prospectus, the company will spend the bulk of its IPO proceeds to expand its sales channels in the US, Germany and India.

Sisram Medical develops products used for non-invasive medical aesthetic treatments such as hair removal, skin rejuvenation, tattoo removal and body contouring.

Deal details

Initial deal terms show the acquisitive Chinese conglomerate is proposing to divest a 25% stake via a 110 million share offering, which is being pitched at HK$8.88 to HK$12.35 per share. There is also a split of 80% new shares and 20% existing shares.

Bankers said the price range represents 16.1 times to 20.1 times estimated 2018 earnings on a syndicate consensus basis.

At the top of the price range, Sisram Medical will command a market valuation of $696 million. This suggests Fosun stands to make $456 million in profit, or 1.9 times its initial investment of $240 million four years ago.

The company has signed up three cornerstone investors with total commitments of $28.8 million, or 16.5% to 23% of the total offering size.

Shanghai FTZ Fund is the biggest cornerstone investor paying $15 million, while private companies Rise Huge Corporation and Neo Derm Group will invest $10 million and $3.8 million respectively.

IPO pricing is scheduled for September 11, with listing on September 19.

Joint IPO sponsors are CICC and Jefferies.

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