China's Sany Heavy delays retail part of $3.3 billion HK offer

HONG KONG Tue Sep 20, 2011 8:51am EDT

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HONG KONG (Reuters) - China's Sany Heavy Industry Co Ltd (600031.SS) has delayed the retail portion of its planned $3.3 billion Hong Kong share offering, saying it needs more time to meet investors before pricing the deal.

Any delay during a share-sale process is usually indicative of lack of interest in the deal, but it was unclear whether Sany Heavy, China's largest construction machinery maker, would be under pressure to re-price the offer as global markets struggle.

"Many stocks in the same sector have been down quite a lot and Sany Heavy has to offer shares at an even lower price to generate interest as investors have a very low risk appetite," Ben Kwong, chief operating officer of KGI Asia said.

The news of the delay comes after Hong Kong's benchmark share index .HSI fell to a 26-month closing low on Monday and as Standard and Poor's downgraded its unsolicited ratings on Italy, adding to concerns of contagion in the debt-stressed euro zone. The Hang Seng index firmed 0.5 percent on Tuesday.

"The road show is still ongoing, but the timing of the relaunch has to be confirmed," a company spokesman said on Tuesday, confirming an earlier report by IFR, a Thomson Reuters publication.

Companies have to publish a prospectus with terms of the offering ahead of the launching the deal to retail investors.

A delay would give Sany Heavy and its underwriters the flexibility to tweak the terms to match demand for the deal, including a change in the number of shares or the price, according to a banker not involved with the process.

Controlled by China's richest man, Liang Wengen, Sany Heavy had launched the global share offering on Monday, braving volatile markets to fund its expansion.

The retail portion, which was scheduled to start on Sept 21, accounted for just 5 percent of the total offer, according to a term sheet sent to investors and seen by Reuters.

The company, often referred to as China's Caterpillar (CAT.N), had planned only a six-day bookbuilding with institutional investors, shorter than the usual eight-day period. It was unclear whether the institutional offering will be extended, IFR reported, quoting sources.

Sany Heavy's Shanghai-listed shares closed up 1.3 percent on Tuesday.

BACK TO LIFE

Sany Heavy's offer is the third multi-billion-dollar deal to hit Hong Kong in recent weeks as the world's biggest listing market roars back to life after being shut for nearly two months.

Companies from insurers to brokerages to banks, including Citic Securities Co Ltd (600030.SS), Haitong Securities Co Ltd (600837.SS), New China Life, have unveiled plans to raise $35.4 billion in coming months.

New China Life, the country's third-largest life insurer, may delay the launch of its Shanghai initial public offering until after it lists in Hong Kong, a Chinese financial magazine reported on Monday.

Sany Heavy had planned to price the offering on Sept 26 and trading in Hong Kong was slated for Oct 3.

The offer would be the biggest since commodities trader Glencore International Plc (GLEN.L) (0805.HK) raised nearly $10 billion in a dual listing in Hong Kong and London in May and would top a $2.5 billion initial public offering by luxury goods maker Prada SpA (1913.HK) in June.

Sany Heavy is offering 1.34 billion shares for HK$16.13-HK$19.38 each, putting the total offer value at up to HK$25.97 billion ($3.3 billion), according to a term sheet seen by Reuters on Monday.

The company is offering a 16.6 percent discount to its Shanghai A share reference point, more than the 13.3 percent discount offered by Citic, due to the offer's large size and the market uncertainty, analysts said.

Sany's Hong Kong offering values the company at up to 14.7 times its 2011 estimated earnings and up to 10.8 times its 2012 earnings, according to forecasts by the banks underwriting the deal.

By comparison, 13 Chinese construction companies on average trade at 19.4 times 2011 earnings and 14.1 times 2012 earnings, according to brokerage CLSA.

Bank of America Merrill Lynch (BAC.N), Citic Securities (600030.SS) and Citigroup Inc (C.N) were tapped as joint global coordinators to manage the offering.

(Writing by Denny Thomas; Additional reporting by Elzio Barreto; Editing by Muralikumar Anantharaman and Lincoln Feast)

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