Calgary-based Sunshine Oilsands has signed up three cornerstone investors that will commit $350 million in its initial public offering, or more than half the targeted $600 million, a source close to the transaction said.
It is a substantial commitment given that the target size of the IPO was initially expected to be between $300 million and $600 million. China Investment Corp, the country’s sovereign wealth fund, has pledged $150 million, while China Petrochemical Corp (Sinopec) will pay $150 million and US-based EIG will contribute $50 million, according to the source.
The management roadshow is expected to start next week, assuming the Canadian offering circular is cleared, the person said. Another source indicated that the roadshow, which was expected on Monday, has been delayed due to a process-related issue.
Along with Xiwang Special Steel’s planned IPO of up to $217 million, the Canadian energy company is expected to be one of the first major IPOs in Hong Kong this year. The biggest amount raised in Hong Kong so far this year is just $55 million.
Attracted by its proximity to rapidly growing China, foreign companies are increasingly choosing Hong Kong as a place to raise equity capital, a trend underscored by Prada’s $2.5 billion offering, which was the biggest foreign listing last year. Hong Kong was also the world’s top destination for new listings in 2011 for the third year in a row, although volumes dropped more than 40% in non-Japan Asia’s equity capital markets last year.
Other big Hong Kong IPOs in the pipeline for this year include Chinese insurance company PICC and London-based diamond retailer Graff Diamonds, which aim to raise as much as $5 billion and $1 billion respectively.
Sunshine Oilsands plans to sell 25% of its share capital in the form of 339.2 million new shares, with 90% targeted at institutional investors. The remaining 10% will be offered to Hong Kong retail investors. The offering comes with a 15% greenshoe option.
Sunshine Oilsands’ focus lies on the development of oil sands leases in the Athabasca region in Alberta, Canada, which claims that its oil sands are the third-biggest proven crude oil reserve in the world, after Saudi Arabia and Venezuela. New projects are being added every year and production is expected to increase to 3 million barrels per day in 2018 from 1.31 million barrels per day in 2008.
While other major oil sands companies, such as Athabasca Oil Sands, are listed in Toronto, Sunshine Oilsands, which was incorporated in 2007, has chosen to come to Hong Kong as it wants to attract Asia-based investors.
Its corporate structure also likely influenced the decision — its major shareholders are all Chinese corporations, which are more familiar with the Hong Kong market, a source has said. The major shareholders include Bank of China, China Life Insurance and Orient International Resources Group.
BOC International, Deutsche Bank and Morgan Stanley are joint bookrunners for the offering.
