Part of the proceeds from the placement will be used to settle the final payments for two companies û Sanyuan Foods and Badaling Tourism Development û it acquired from the listed subsidiary last year. The rest will go towards paying down debt.
The shares were priced at the bottom of the HK$16.53 to HK$16.875 offered range, which translated into a 5% discount to Beijing EnterprisesÆ close on Wednesday (May 3).
The offered discount of 3-5% was quite low compared with other recent Hong Kong placements, but according to the source there was good demand for the shares from long-only funds who were believed to be keen on the company because of a pending asset injection.
The deal was said to have attracted more than 30 investors and to have been about 1.5 times covered.
ôGiven the demand, the placement could have been done at a 4% discount but the seller decided to go with the wide end because it wanted to keep the long-only funds,ö one observer said.
The placement accounted for about 8% of Beijing Enterprises outstanding share capital and will see Beijing Enterprises InvestmentsÆ stake in the company fall to about 52.05% from 60%.
Beijing Enterprises Holdings, which is the Hong Kong-listed investment arm of the Beijing municipal government, has been selling off non-core assets such as its retailing and tourism operations in the past year to focus its business on infrastructure and utilities. As part of that plan the former red-chip conglomerate is expected to take over the piped gas assets in Beijing City that are currently owned by its ultimate parent.
According to market sources, the asset injection has already received the necessary approvals and is expected within the next quarter or two. If completed, this transaction would provide a major boost to the company as the assets have an estimated value of about $2 billion to $3 billion, or up to two times Beijing EnterprisesÆ current market capitalisation.
The company said its net profit increased by 13.3% to HK$570.4 million ($73.5 million) in 2005 as revenues improved 13.8% to HK$11 billion ($1.4 billion). At the same time it noted that its bottom line would take a one-off hit of between Rmb271.5 million and Rmb286.07 ($35.7 million) in the first half of this year as a result of the conversion of non-tradable shares into tradable ones at its indirectly owned subsidiary Beijing Yanjing Brewery.
The share price reacted little to that news, however, and continued on the upward streak that has taken it 20.4% higher in the past month alone to yesterdayÆs close of HK$17.40. It is up 45% in the past six months.
Of the five other sizeable placements by Hong Kong listed companies since the beginning of April, none has been done at a discount of 5% or less. Rather, the discounts have ranged from 5.3% for a top-up placement in Yue Yuen Industries and 5.4% for CNOOCÆs $1.98 billion follow-on to the 8.7% margin on a sell-down in Gome Electrical Appliances by its chairman.