China Tower secures cornerstone investors for US$8.7b Hong Kong IPO

HONG KONG: China Tower, the world’s largest telecoms tower operator, has lined up US$1.4 billion (RM5.7 billion) from 10 cornerstone investors for its Hong Kong IPO of up to US$8.7 billion, in what would be the world’s biggest listing in four years, five people close to the deal told Reuters.

The Beijing-based mobile phone infrastructure firm has set an indicative price range of HK$1.26 to HK$1.58 (RM0.65 to RM0.82) per share for the initial public offering (IPO), valuing itself at between US$28 billion and US$35 billion, said the people.

China Tower’s deal is seen as a key test of the Hong Kong IPO market as investors consider several big deals at a delicate time for the city’s stock market, with the benchmark Hang Seng Index down about 6% so far this year.

Earlier this month smartphone maker Xiaomi priced its IPO at the bottom of its range in a US$5.4 billion deal while online on-demand services operator Meituan Dianping is expected to raise more than US$4 billion when it floats in the coming months.

Chinese investment firm Hillhouse Capital Group made the biggest commitment of US$400 million, followed by US fund firm Och-Ziff Capital Management, which is pledging US$300 million, the sources said.

Other cornerstones include a unit of Alibaba Group, China National Petroleum Corporation’s CNPC Capital, and two US funds, Darsana Master Fund and Invus Public Equities.

Cornerstone investors usually buy significant chunks of an IPO with a certain lock-up period. The practice is common in several Asian markets, including Hong Kong, and helps bolster demand for large deals.

China Tower plans to sell about 43.1 billion shares, or 25% of its enlarged share capital, according to the people.

It opened books to institutional investors yesterday and price the deal on Aug 1.

The top end of the price range – HK$1.58 – represents a multiple of nearly 8 times adjusted earnings before interest, tax, depreciation and amortization (ebitda) for 2018 and 7.3 times its 2019 ebitda, as forecast by its underwriting syndicate.

At US$8.7 billion, China Tower’s IPO will surpass the US$7.6 billion Hong Kong float of Postal Savings Bank of China in 2016, becoming the world’s largest IPO since Alibaba’s US$25 billion New York listing in 2014.