Changhsha Zoomlion seeks $2.1 billion in Hong Kong share sale
HONG KONG: Changsha Zoomlion Heavy Industry Science & Technology Development Co. is seeking as much as $2.1 billion in a Hong Kong stock sale as Chinese growth spurs demand for construction equipment.
The world's largest supplier of concrete-making machinery is offering 870 million shares at HK$13.98 to HK$18.98 apiece, according to terms for the transaction. Zoomlion, which is already listed in Shenzhen, China, will have a market value of $12.7 billion if the sale is priced at the top of the range, according to the terms.
Zoomlion, which also makes cranes, roadmaking equipment and fire trucks, plans to raise funds as China boosts spending on building highways, factories and railways. The sale values the company at as much as 15.6 times next year's expected earnings, compared with about 15 times for Hong Kong-listed wheel loader maker Lonking Holdings Ltd.
"There's still some investor interest in industrial IPOs such as Zoomlion because China's economy is still growing," said Ronald Wan, managing director of China Merchants Securities Co. "One potential risk is rising inflation in China, which could increase raw material costs." Zoomlion, based in Changsha, central China, plans to price the shares on Dec. 17 and to start trading on Dec. 23. The sale includes an overallotment option of 130.4 million shares. China International Capital Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley are managing the offering.
The crane maker fell 1.1 percent to 14.08 yuan at the 11:30 a.m. trading break in Shenzhen. The stock has gained 35 percent this year, compared with an 8.5 percent decline for the Shenzhen Stock Exchange Constituent A-share Index. The China-listed stock trades at about 20 times next year's estimated earnings.
China's spending on urban fixed assets jumped 24 percent through October. Zoomlion, which generated more than 90 percent of its sales in the country last year, expects annual profit to jump at least 76 percent in 2010, it said on Dec. 1.
The company has factories in Shanghai, Hunan, Shaanxi and Guangdong. It also has operations in Europe following the 2008 acquisition of Cia Italiana Forme Acciaio SpA.
Companies have raised a record $45.2 billion, excluding overallotment shares, through Hong Kong IPOs this year, according to Bloomberg data. AIA Group had the largest sale, raising $17.8 billion in October. Demand for new shares has waned in Hong Kong, while the benchmark Hang Seng Index has declined 6 percent from its Nov. 8 high for this year, because of concerns that China's attempts to tackle inflation may damp growth.
Consumer prices rose 4.4 percent in October, the fastest pace in two years. China plans to adopt a "prudent" monetary policy next year, state-run Xinhua News Agency said on Dec. 3 after a meeting of the ruling Communist Party's politburo. Sateri Holdings Ltd., the Chinese cellulose maker with operations in Brazil, priced its IPO shares at the bottom of the range, two people familiar with the transaction said on Dec. 4. It raised HK$3.33 billion ($429 million).
A day earlier, China ZhengTong Auto Services Holdings Ltd., the second biggest Bayerische Motoren Werke AG dealer in China, priced its IPO in the middle of the range, raising HK$3.65 billion, according to two people with knowledge of the matter. China Rongsheng Heavy Industries Group Holdings Ltd., the nation's largest shipbuilder outside state control, has fallen 9 percent from its Hong Kong share sale price since raising HK$14 billion last month. -Bloomberg