Shirble returns with enlarged IPO

The Shenzhen-based department store operator is looking to raise as much as $205 million, up from a maximum $130 million during a previous listing attempt in July.

Shirble Department Store Holdings, which delayed a $130 million Hong Kong listing plan in early July, is returning to the market with hopes of raising more capital than its maximum target four months ago. The Shenzhen-based department store operator will kick off the institutional bookbuilding today.

The company is now looking to tap the market for between HK$1.16 billion and HK$1.59 billion ($149 million to $205 million), which compares with the $102 million to $130 million that it attempted to raise last time around. 

It’s hardly a surprise that Shirble has decided to return to the Hong Kong equity market at this time. The recent stockmarket rally, which has seen the benchmark Hang Seng Index climb 24% from its 2010 low in May, has prompted several companies to revive their previously grounded IPO plans.

Chinese wind-turbine maker Xinjiang Goldwind Science & Technology, which scrapped a planned listing in June because of weak market conditions, returned to the Hong Kong market in late September and pocketed $916 million. China Rongsheng Heavy Industries, one of the largest shipbuilders in China, revived its Hong Kong IPO plan on Monday with the aim of raising $2.27 billion. The company last attempted to raise $2 billion from an IPO here in 2008.

The fact that IPOs by other Chinese consumption plays have received strong demand in recent weeks should make Shirble more appealing. Domestic competitor Springland International, a department store and supermarket operator in the Yangtze River Delta, completed Hong Kong’s largest department store IPO last month, raising $477 million. Retail investors subscribed for more than 80 times the shares earmarked for them, while the institutional portion of the deal was more than 16 times covered.

Among other consumption plays, Evergreen International, a menswear brand, achieved a subscription ratio of 1,231 times for the last week. And, in September, Boshiwa's Hong Kong public offering ended 485 times covered. A designer and retailer of children’s clothes, Boshiwa raised a total of $368 million from its IPO.

Shirble is offering 625 million shares, all primary. That’s nearly 67% more than the 375 million shares it originally planned to sell. However, the indicated price range is lower at HK$1.85 to HK$2.55 compared to HK$2.11 to HK$2.81 four months ago. That suggests the valuation has been reduced from the 15 to 20 times this year's earnings that it previously sought.

By comparison, Springland’s IPO price valued the company at 23 times its projected earnings for 2011.

The Shirble deal comes with a 15% greenshoe option which, if fully exercised, would allow the company to raise up to $236 million by selling an additional 93.75 million new shares.

Ninety percent of the shares will be sold to institutional investors, while 10% are earmarked for Hong Kong retail investors. The split is subject to a clawback mechanism which could increase the retail tranche to as much as 50% of the deal in case of strong retail demand.

CCB International Asset Management, an indirect wholly owned subsidiary of China Construction Bank Corporation, has agreed to support the deal as a cornerstone investor by purchasing $20 million worth of shares. The firm has invested in a number of yet-to-be-listed and listed Chinese companies both in the A- and H-share market and across various sectors, including healthcare, energy and resources.

Shirble plans to use the proceeds to build new stores in different cities and provinces across China. The company currently operates 11 mid- to low-end department stores in Shenzhen and in Hunan province. Although founded as recently as 1996, Shirble is among the oldest stores in Shenzhen.

The shares will be priced on November 11 and the trading debut is scheduled for November 17. BNP Paribas and BOC International are joint bookrunners of the deal.

¬ Haymarket Media Limited. All rights reserved.
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