Towngas China raises $122 million from primary share placement

The utility company’s deal draws robust demand and prices at the top of the range, as investors welcome the liquidity event.

Hong Kong-listed Towngas China has raised HK$946.5 million ($122 million) from a primary share placement, after fixing the price at the top of the indicative range.

The share sale was conducted yesterday through an accelerated bookbuild. The deal launched just before 2pm Hong Kong time after the stock was suspended from trading and closed in about three hours.

Demand was strong with 91 lines in the order book, a source said last night. The buyers included a good mix of long-only accounts, high-net-worth individuals and hedge funds, and the book was multiple times covered throughout the price range, the person noted.

As it has been a long time since the company’s last equity transaction, many investors had been hoping for more liquidity, which helps explain the strong appetite for the deal, the source said.

Towngas China is a subsidiary of Hong Kong-listed Hong Kong and China Gas, which is commonly referred to as Towngas. It focuses on piped city-gas projects in mainland China.

The company sold 150 million new shares, or 6% of the share capital, at HK$6.31 each. The final price translated into a discount of 6.9% to yesterday’s midday closing price of HK$6.78.

The deal was marketed in a price range between HK$6.24 and HK$6.31, which represented a discount of 6.9% to 8%. The company is subject to a 90-day lock-up period.

Towngas’s share price, which was up 3% yesterday before trading was suspended, had a bullish run last year and climbed about 52% for the year. By comparison, the Hang Seng Index rose about 23% in 2012.

Towngas China plans to use the proceeds for future investments and general working capital, according to the term sheet. It is the leading supplier of quality piped-gas in China and has been investing in the country’s gas industry since 1998, it says.

According to the Hong Kong stock exchange website, the company constructs gas pipelines, operates city gas pipeline networks and gas fuel automobile refilling stations, and sells gas household appliances.

HSBC and UBS were joint bookrunners for the deal.

Only about a week into 2013, there has already been a steady flow of placements in the Hong Kong ECM market. Notable deals include Carlyle’s $796 million sale of its remaining shares in China Pacific Insurance earlier this week.

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