Goldwind scraps $1.2 billion Hong Kong IPO

The Chinese manufacturer of wind turbine generators becomes the fifth major company to cancel or delay an Asian listing since the beginning of May.

Xingjiang Goldwind Science & Technology, which was looking to raise up to HK$9.09 billion ($1.2 billion) from a Hong Kong initial public offering, has decided to scrap the plan, citing the "recent unexpected and excessive market volatility".

The increasingly risk-averse sentiment and worries over the global economic recovery have prompted a series of listing hopefuls to either delay or cancel their deals. In the past month alone, four major IPOs have been pulled from the Hong Kong and Singapore stock exchanges.

Giti Tire, China's largest tire maker, put its up to $500 million share sale on hold on May 3. In the same week, New Century Shipbuilding aborted its already downsized $484 million IPO on the eve of pricing. That was followed by Swire Properties, which scraped a highly-anticipated sale that was looking to raise up to $2.7 billion for its Hong Kong-listed parent company; and iron ore miner China Tian Yuan Mining, which pulled its up to $500 million share offering.  

Some of these companies withdrew their long-prepared deals as volatility in the market made it impossible to agree on a price, sources said. And, in the case of Swire Properties, pushing ahead with the deal amid the sharp drop in equity markets would be against the interests of the shareholders of parent company Swire Pacific, the latter said in a stock exchange filing.

Goldwind, which is already listed in Shenzhen, "has formed the view that it would be inadvisable to proceed with the global offering at this time", the company said in a statement to the Hong Kong stock exchange yesterday. The Urumqi-based company had planned to price its IPO on June 11 and start trading on June 22.

As of yesterday, the Hang Seng Index was down 8.1% year-to-date, while the Shanghai Composite Index has tumbled 20% so far this year. Goldwind's Shenzhen-listed shares have fallen 6.7% since the start of investor education for the Hong Kong offering and closed at Rmb21.14 on Friday.

Goldwind's announcement is believed to have cast a shadow over the much-talked about IPO of Agricultural Bank of China, which kicked off investor education yesterday. The bank is looking to raise more than $22 billion, and perhaps as much as $30 billion.

Goldwind was offering 15% of its enlarged share capital, or 395.3 million shares, all primary, at between HK$19.80 and HK$23 per share. The price range indicated a deal size between HK$7.82 billion and HK$9.09 billion ($1.01 billion and $1.2 billion) and represented a 2010 price-to-earnings ratio (P/E) of 18.8 to 21.8 times, sources said.

By contrast, Hong Kong-listed wind farm operator China Longyuan Power trades at 24.2 times and Dongfang Electric, also Hong Kong-listed, is quoted at 20.5 times, sources said.

Goldwind, a leading manufacturer of wind turbine generators in China, planned to use the funds raised from the share sale to grow its wind power services and for wind farm investment and development, it said in the IPO prospectus. The transaction was being arranged by China International Capital Corp, Citi and Credit Suisse.

Goldwind's planned expansion into power generation is not in line with the Chinese regulators' development blueprint and government policies may have dampened investor confidence in the wind power group. During the bookbuilding, several media outlets, including Reuters, reported that Beijing may stop approving share sales by renewable energy companies on fear of overcapacity in the new energy sector.

The State Council, China's cabinet, early this year expressed concerns about overcapacity and repeated construction in the steel, cement, flat glass, chemically processed coal and wind turbine sectors. The government also increased the threshold for bank lending on these sectors.

By comparison, Goldwind's A-share offering in 2007 went like a breeze. The company listed on the Shenzhen Stock Exchange, the trading platform for China's smaller and start-up firms, after raising $244 million in a deal arranged by Haitong Securities. It sold 50 million shares at Rmb36 apiece, which valued the company at a P/E of 29.98 times.

Lin Yong, an investment banker at Haitong at the time, told FinanceAsia in a recent interview that they did no investor education ahead of the A-share IPO. All they did was file the documents that the exchange required and watch the deal get heavily oversubscribed. 

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