Xingda International placement upsized to $125 million

The upsize option is fully exercised, increasing the size of the deal by 26%.

Xingda International, a Hong Kong-listed Chinese maker of radial tyre cord for trucks, and some of its existing shareholders yesterday raised a combined HK$964.4 million ($125 million) from a share placement. The Jiangsu-based company's portion of the proceeds will be used to fund the development of existing facilities and new products.

The offering comprised 175.34 million shares, or 11.5% of the enlarged share capital, which were sold at HK$5.50 apiece. The final price was fixed towards the low end of the range and represents a 7.6% discount to Wednesday's closing price of HK$5.95. The stock was suspended throughout yesterday's trading session.

This was a great time for the company to raise capital and for its shareholders to monetise part of their holdings as the stock has soared 124.5% in the past 12 months and reached a one-year high on Wednesday. The surge in the share price didn’t affect investor interest in the offering, however. Demand was strong and an upsize option of 36.4 million shares was fully exercised, boosting the total deal size by 26%. The deal was fully covered in just two hours after it opened yesterday morning, but was kept open until 8pm Hong Kong time last night in order to give investors outside of Asia a chance to participate in the trade, sources familiar with the deal said.

Around 70% of the investors were long-only funds and most of them were from Asia, the sources said.

The offering consisted of 79% primary shares, and 21% secondary shares coming from some of the company's shareholders, namely Great Trade, In-Plus, Perfect Sino, Power Aim and Wise Creative.

Xingda's portion of the deal -- 138.9 million shares -- allowed it to raise about $98 million of fresh capital. The shares were offered at a price between HK$5.47 and HK$5.71, which represented 4% to 8% discount to Wednesday's closing price of $5.95. The stock has been trading at an average price of HK$3.90 in the past three months and at a daily trading volume of 3.19 billion shares.

Citi was the sole bookrunner of the deal.

It is widely believed that there’s a huge growth potential for the company, which is an immediate beneficiary of China’s booming automobile industry. 

Last year, China overtook the US to become the world’s biggest automobile producer in terms of units, accounting for 29% of the world’s total automobile output. The country's car manufacturers produced approximately 13.8 million vehicles in 2009, representing an increase of 47.8% from the previous year, according to statistics from the China Association of Automobile Manufacturers.

That, in turn, led to an 8.6% year-on-year increase in the country’s total tyre output to 380 million units, and a 16% year-on-year increase in radial tyres.

During the first half of 2010, Xingda’s net earnings surged 137% year-on-year to Rmb476.6 million ($70 million), helped by a 71.5% increase in sales volumes. Demand for the group’s core product, radial tyre cord, jumped 70.5% to 173,400 tonnes, the company said last month.

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