Sateri and ZhengTong seek to raise a combined $1.1 billion

Sateri, a maker of specialty cellulose, aims to raise $600 million, while car and spare parts dealer ZhengTong is looking to reap $554 million.

With only a month left until the year-end break, Hong Kong initial public offerings continue to flow as issuers race to make the most of the remaining days of the year.

Year-to-date IPO volumes in Hong Kong have topped $46 billion, already exceeding the full year forecast of $39 billion made by PricewaterhouseCoopers at the beginning of 2010. And equity strategists warn of potential asset bubbles fuelled by excess liquidity across the region.

Against that backdrop, two companies kicked off institutional bookbuilding yesterday with the aim of raising a combined $1.1 billion ahead of their Hong Kong listings.


Sateri Holdings, a maker of specialty cellulose used in a wide range of products from sausage casings to cosmetics, is looking to raise between HK$3.33 billion and HK$4.64 billion ($430 million to $600 million) from its Hong Kong IPO.

The company is headquartered in Shanghai and majority-owned by RGE, a conglomerate controlled by Sukanto Tanoto, who was ranked by Forbes as the richest man in Indonesia in 2008.

Sateri produces dissolving wood pulp in Brazil and viscose staple fibres in China. Its products, which are used for different applications such as textiles, non-woven products, tires, food products and cosmetics, have seen a surge in demand recently, Sateri said in a preliminary IPO prospectus.

It operates its own wood plantations in Brazil, which provide the company with a secure and stable supply of eucalyptus wood – the principal raw material used in the production of dissolving wood pulp, the company said.

Sateri is offering 505.33 million shares, all primary, at a price of HK$6.60 to HK$9.20 apiece. The deal could stretch to as much as $690 million if a 15% greenshoe option is fully exercised, allowing the company to sell additional 75.8 million shares.

About 90% of the deal is targeted at institutional investors, while 10% has been earmarked for the Hong Kong public offering. The final split is subject to a standard clawback mechanism.

The IPO price will be fixed on December 2 and the listing is scheduled for December 8. BOC International, Credit Suisse and Morgan Stanley are joint bookrunners.

Sateri plans to use approximately HK$1.6 billion of the net proceeds to expand its operations in Brazil, including an increase in the wood supply for future mill capacity expansions and an increase in the annual dissolving wood pulp production capacity at its Bahia specialty cellulose mill from 465,000 tonnes to 550,000 tonnes by December 2013.

Another HK$1.35 billion will be used to build a greenfield viscose staple fibre mill with an annual production capacity of 200,000 tonnes in the Fujian province in southeastern China by December 2012.

Sateri made a $106.9 million net profit in 2009 and forecasts an increase to at least $302 million this year.

China ZhengTong

Meanwhile, China ZhengTong Auto Services, a BMW dealer and leading 4S (sale, spare parts, service and survey) dealer in China, is in the market with a share offer between HK$3.4 billion and HK$4.3 billion ($438 million to $554 million).

As of June 30, ZhengTong had 22 dealerships across China selling BMW, Porsche, Audi and other brands. It plans to use 85% of the net IPO proceeds to open additional stores and add other premium brands to its current offering.

The Wuhan-based company is offering 500 million shares, of which 450 million, or 90% are targeted at institutional investors. The remaining 10% are earmarked for Hong Kong retail investors. The shares are offered at HK$6.80 to HK$8.60 each.

The deal is being managed by CCB International and J.P. Morgan, and comes with a 15% greenshoe option, which means the company could raise up to $637 million in case of strong demand.

The price is due to be fixed on December 3 and the listing is scheduled for December 10.

ZhengTong made $21 million in profit in 2009 and, in the first six months this year, the profit climbed to $22 million.

Clive McDonnell, head of Asian equity strategy research at BNP Paribas Securities (Asia), said in a report that “Hong Kong is at risk of experiencing an asset price bubble which policymakers are unable to prevent”. He thinks the Hang Seng Index is on track to reach a new high of 32,000 points and says the rising levels of excess liquidity across the region increase the risk of a bubble. Yesterday, the Hong Kong blue-chip index closed at 23,524 points -- down from a peak just above 25,700 earlier this month.

Last week alone, there were 20 IPOs in Asia-Pacific (ex Japan), raising a total of $6 billion, which compares with 17 IPOs and $7.9 billion of funds raised the week before, according to Dealogic data.

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