Monday, July 27, 2015

China Railway Signal Begins Taking Orders for $1.8 Billion Hong Kong IPO

(WSJ) State-owned China Railway Signal & Communication Corp. began order-taking on Monday for its up to $1.8 billion Hong Kong initial public offering, but the rail-signal maker has already sold over half the float to cornerstone investors.

In the first big IPO since China’s market rout last month, the Beijing-based company has secured $971 million of investment, or around 54%, from 16 cornerstone investors, who agreed to buy and hold the shares for six months, according to a term sheet seen by The Wall Street Journal. Those investors include many state-owned firms—including China Railway Group Ltd. , which has committed to buy US$100 million of the IPO, and life insurer China Life Insurance Co. , which agreed to buy US$50 million, the term sheet said.

Other investors, including Chinese financial firms China Merchants Bank Asset Management and China Minsheng Investment Corp., agreed to buy $50 million each, the term sheet said.

In Hong Kong, bankers can sell part of the shares to be floated in an offering to cornerstone investors before official order-taking, which began Monday, kicks off.

China Railway Signal is selling 1.75 billion new shares, or 20% of its enlarged share capital, at an indicative price range of HK$6.30-8.00 per share (US$0.78-$1.03), the document said.

The potential deal would provide a key test of investor sentiment in the IPO market as the first major offering since China’s stock markets began coming off seven-year highs in mid-June. At a size of up to $1.8 billion, China Railway Signal’s IPO will be Hong Kong’s fourth-largest this year, and cements the city’s standing as the top listing venue globally in 2015.

China Railway Signal is the world’s largest train traffic-control systems maker by revenue. Half of the proceeds from the IPO will be used for fixed-asset investment and research. Some money will also go toward overseas acquisitions as part of its strategy to expand into international markets.

Source: Wall Street Journal by Yvonne Lee

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