Sinofert raises $308 million from placement

The deal for the Chinese fertilizer company sees good demand despite a 94% surge in the share price so far this year.
Sinofert Holdings, a manufacturer and distributor of fertilizers and one of ChinaÆs largest listed chemicals companies, last night raised HK$2.4 billion ($308 million) from a sale of new shares after its share price hit yet another record.

The company, which is a unit of Mainland oil trader Sinochem Corporation, said it will use the money for business expansion, which could include both greenfield developments and acquisitions. Some of the funds may also go towards working capital or other general corporate matters.

Market sources say Sinofert is likely gearing up to buy more assets from its parent company.

Hong Kong-listed Sinofert offered 400 million new shares, or about 6.9% of its existing share capital, at HK$5.78 to HK$6 and priced the deal at the top of the range for a 4.2% discount to the latest market price.

Sinofert suspended the stock mid-morning yesterday when the share price was up one Hong Kong cent at HK$6.26 and launched the placement at about 11.30am Hong Kong time. Citigroup was the sole bookrunner.

In order to capture interest from both London and the US, the order book stayed open into the evening and when it closed the deal was said to have been ôcomfortably oversubscribedö, according to one source. The demand was essentially global in nature with a total of about 50 participating institutional investors.

Sinofert was one of seven red-chips named in a report in the state-run Securities Times last month which outlined companies that would be allowed to sell A-shares in the domestic market. Red-chips which have most of their assets and businesses in China, but are incorporated in Hong Kong or offshore, are currently not permitted to list in the Mainland markets.

Sinofert's share price has rallied 94% so far this year as demand for fertilizers grows in line with the rapid expansion of the Chinese economy and the governmentÆs focus on revitalizing farming in its rural provinces. It currently trades at 30 times forward earnings. Back in May when it was up 70%, a Citi analyst downgraded his recommendation on the stock to ôholdö saying it appeared to be pricing in strong organic growth for the next three years following the massive gains.
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