Yitai Coal Raises $903 Million with Hong Kong IPO
-- Yitai prices Hong Kong IPO at HK$43 per share, bottom of HK$43-HK$53 indicative range
-- Citic Heavy shares up 0.6% at 4.70 at midday on Shanghai debut, while Shanghai index is down 0.5%
-- Yitai Coal, Citic Heavy in industries closely tied to Chinese economic growth
HONG KONG--A Chinese coal miner managed to raise just over US$900 million in Hong Kong's second-largest initial public offering so far this year, though the pricing was at the low end of the indicative range, while a heavy machinery maker staged a modest debut in Shanghai, as new listings by Chinese companies continue to waiver amid volatile markets and the country's slowing economy.
Despite having placed almost half the shares on offer with cornerstone investors who had promised to hold them for six months after listing, Inner Mongolia Yitai Coal Co. (3948.HK) priced its IPO at the bottom of the HK$43-HK$53 per share indicative range to raise US$903 million. The deal was Hong Kong's second biggest this year after Haitong Securities Co.'s US$1.8 billion IPO in April.
Meanwhile, China's Citic Heavy Industries Co. (>> CITC HEAV) had a lackluster debut in Shanghai on Friday after an overnight interest rate cut by China's central bank raised concerns about the health of the country's economy.
While managing to get their deals done in an environment where scrapped IPOs have become common, both companies are in industries that have seen share price declines as China's growth has slowed in the past year. Coal consumption in China, the world's largest user of the fuel, fell 2% in May from a year earlier, while a slump in infrastructure projects has eaten into machinery demand.
In its deal, Yitai sold 162.7 million H shares, or Hong Kong-listed shares, for which it had previously received commitments from seven cornerstone investors totaling US$388 million, accounting for about 43% of the shares on offer. The seven included Chinese state-owned Datang International Power Generation Co. and Baosteel Resources International Co., a subsidiary of Chinese state-owned Baosteel Group Corp. Yitai, which produces thermal coal for power generation, also made a deal with one of its IPO managers, China Merchants Securities (>> Halcon Resources Corp) Co., for the latter to buy up US$100 million worth of any unsold shares.
Yitai's pricing came on the same day that Citic Heavy started trading in Shanghai. Citic Heavy, based in Henan province, had earlier raised 3.2 billion yuan (US$505.9 million) in China's second-largest domestic IPO this year. Citic Heavy's shares were up 0.6% at midday from its CNY4.67 IPO price at CNY4.70, outperforming the benchmark Shanghai Composite Index, which was down 0.5%.
Citic Heavy's shares are "closely tied to the broad economy, and may not sustain [their] rally," aid Xu Yinhui, an analyst at Guotai Junan Securities in Shanghai.
"Whether new shares are welcomed by investors really depends on market confidence over the broad economy," Mr. Xu said.
Citic Heavy's performance is in stark contrast to the first-day pops generally recorded by China IPOs: China Communications Construction Co., which raised US$790.5 million in February in the largest domestic IPO in China this year, rose 29% when it began trading.
Investor confidence in Hong Kong has been shaken by turbulent global financial markets and Facebook's poor performance since its Nasdaq listing in May. Last month, London jeweler Graff Diamonds Corp. postponed a US$1 billion Hong Kong IPO that had been heavily anticipated as a signal of the city's strength in IPOs after several years as the world's No. 1 venue for such deals. So far this year, just US$4.19 billion has been raised from IPOs in Hong Kong, compared with US$24.42 billion in the same period of 2011, according to Dealogic.
Still, ahead of the summer lull, several companies--Chinese heavy equipment manufacturer Sany Heavy Industry Co. (>> Sany Heavy Industry Co., LTD) and China Everbright Bank Co. (>> China Everbright Bank Co., Ltd)--are looking to press ahead with previously shelved deals in Hong Kong. Shanghai-listed Sany Heavy, owned by China's richest person, Liang Wengen, and in the same sector as Citic Heavy, is looking to take orders July 23 for a US$2 billion IPO, less than the US$3.3 billion it was seeking in an earlier deal. Everbright, which had been seeking US$6 billion last year, is now looking into relaunching its IPO, although people familiar with the situation said plans are at a much more tentative stage.
--Yue Li contributed to this article.
Write to Nisha Gopalan at nisha.gopalan@dowjones.com
-- Citic Heavy shares up 0.6% at 4.70 at midday on Shanghai debut, while Shanghai index is down 0.5%
-- Yitai Coal, Citic Heavy in industries closely tied to Chinese economic growth
HONG KONG--A Chinese coal miner managed to raise just over US$900 million in Hong Kong's second-largest initial public offering so far this year, though the pricing was at the low end of the indicative range, while a heavy machinery maker staged a modest debut in Shanghai, as new listings by Chinese companies continue to waiver amid volatile markets and the country's slowing economy.
Despite having placed almost half the shares on offer with cornerstone investors who had promised to hold them for six months after listing, Inner Mongolia Yitai Coal Co. (3948.HK) priced its IPO at the bottom of the HK$43-HK$53 per share indicative range to raise US$903 million. The deal was Hong Kong's second biggest this year after Haitong Securities Co.'s US$1.8 billion IPO in April.
Meanwhile, China's Citic Heavy Industries Co. (>> CITC HEAV) had a lackluster debut in Shanghai on Friday after an overnight interest rate cut by China's central bank raised concerns about the health of the country's economy.
While managing to get their deals done in an environment where scrapped IPOs have become common, both companies are in industries that have seen share price declines as China's growth has slowed in the past year. Coal consumption in China, the world's largest user of the fuel, fell 2% in May from a year earlier, while a slump in infrastructure projects has eaten into machinery demand.
In its deal, Yitai sold 162.7 million H shares, or Hong Kong-listed shares, for which it had previously received commitments from seven cornerstone investors totaling US$388 million, accounting for about 43% of the shares on offer. The seven included Chinese state-owned Datang International Power Generation Co. and Baosteel Resources International Co., a subsidiary of Chinese state-owned Baosteel Group Corp. Yitai, which produces thermal coal for power generation, also made a deal with one of its IPO managers, China Merchants Securities (>> Halcon Resources Corp) Co., for the latter to buy up US$100 million worth of any unsold shares.
Yitai's pricing came on the same day that Citic Heavy started trading in Shanghai. Citic Heavy, based in Henan province, had earlier raised 3.2 billion yuan (US$505.9 million) in China's second-largest domestic IPO this year. Citic Heavy's shares were up 0.6% at midday from its CNY4.67 IPO price at CNY4.70, outperforming the benchmark Shanghai Composite Index, which was down 0.5%.
Citic Heavy's shares are "closely tied to the broad economy, and may not sustain [their] rally," aid Xu Yinhui, an analyst at Guotai Junan Securities in Shanghai.
"Whether new shares are welcomed by investors really depends on market confidence over the broad economy," Mr. Xu said.
Citic Heavy's performance is in stark contrast to the first-day pops generally recorded by China IPOs: China Communications Construction Co., which raised US$790.5 million in February in the largest domestic IPO in China this year, rose 29% when it began trading.
Investor confidence in Hong Kong has been shaken by turbulent global financial markets and Facebook's poor performance since its Nasdaq listing in May. Last month, London jeweler Graff Diamonds Corp. postponed a US$1 billion Hong Kong IPO that had been heavily anticipated as a signal of the city's strength in IPOs after several years as the world's No. 1 venue for such deals. So far this year, just US$4.19 billion has been raised from IPOs in Hong Kong, compared with US$24.42 billion in the same period of 2011, according to Dealogic.
Still, ahead of the summer lull, several companies--Chinese heavy equipment manufacturer Sany Heavy Industry Co. (>> Sany Heavy Industry Co., LTD) and China Everbright Bank Co. (>> China Everbright Bank Co., Ltd)--are looking to press ahead with previously shelved deals in Hong Kong. Shanghai-listed Sany Heavy, owned by China's richest person, Liang Wengen, and in the same sector as Citic Heavy, is looking to take orders July 23 for a US$2 billion IPO, less than the US$3.3 billion it was seeking in an earlier deal. Everbright, which had been seeking US$6 billion last year, is now looking into relaunching its IPO, although people familiar with the situation said plans are at a much more tentative stage.
--Yue Li contributed to this article.
Write to Nisha Gopalan at nisha.gopalan@dowjones.com
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