HONG KONG Haitong Securities Co Ltd (600837.SS), China's No.2 brokerage by assets, launched on Tuesday an up to $1.77 billion Hong Kong share offering, tapping equity markets to fund overseas takeovers and growth of its margin finance, hedge fund and private equity businesses.
The outcome of the deal, which at the top of its range would be the largest public offering in the region so far this year, will be closely monitored by investors, bankers and a growing list of companies hoping to raise funds in Asia's top IPO destination.
It comes as a rally in the benchmark Hang Seng index .HSI since the beginning of the year has also emboldened companies such as China Everbright Bank (601818.SS) and construction giant Sany Heavy Industry Co Ltd (600031.SS) to revive their listing plans.
Others, like London-based high-end jeweler Graff Diamonds, have taken initial steps on planned listings, prompting investment bankers to bet on a booming second quarter of 2012.
Still, the structure of the Haitong offer shows the company and its advisers are taking no chances after it flopped in December, setting aside about one-third of the deal for so-called cornerstone investors.
Haitong is offering up to 1.229 billion new shares (6837.HK) at an indicative price range of HK$10.48 to HK$11.18 each, the company said in a securities filing.
At the top of the range, the stock sale would total HK$13.74 billion ($1.77 billion), making it the largest public offering in Asia Pacific so far this year and the largest in Hong Kong since the $1.9 billion New China Life Insurance Co Ltd (601336.SS) (1336.HK) dual listing in the city and Shanghai in December.
Haitong, which is already listed in Shanghai, is slated to price the offer on Friday, with shares beginning to trade in Hong Kong on April 27.
Pan-Asia private equity firm PAG and U.S. asset manager DE Shaw & Co Ltd were among 11 cornerstone investors that pledged to buy about $580 million worth of Haitong's shares in the deal, according to the terms of the offering.
PAG, headed by former TPG Capital dealmaker Weijian Shan, agreed to buy $300 million worth of shares, with New York-based DE Shaw pledging $100 million. Other cornerstone investors included Japan's SBI Holdings (8473.T), Taiwanese brokerage KGI Securities 6008.TWO, Dah Sing Bank (2356.HK) and The Oman Fund.
The deal also had "significant demand" from so-called anchor investors, one source involved in it said on Thursday.
Cornerstones back many Asian listings, committing to buy large, guaranteed stakes and agreeing to a lock-up period during which they will not sell their shares. Anchor investors have fewer restrictions on when they can sell the stock.
Haitong had scrapped a deal in December to raise up to $1.7 billion, citing turmoil in global markets.
At the time the company had $222 million in pledges from two cornerstone investors, private equity firm Warburg Pincus LLC WP.UL and Japan's Chuo Mitsui Trust & Banking Co, a unit of Sumitomo Mitsui Trust Holdings Inc (8309.T).
Citigroup Inc (C.N), Credit Suisse AG CSGN.VX, Deutsche Bank (DBKGn.DE), JPMorgan (JPM.N), UBS UBSN.VX and Haitong's own Haitong International are acting as joint global coordinators on the offering.
BoCom International, HSBC Holdings Plc (HSBA.L)(0005.HK), ICBC International, Nomura and Standard Chartered Plc (STAN.L) were also hired as joint bookrunners.
($1 = 7.761 Hong Kong Dollars)
(Additional reporting by Fiona Lau and Jing Song; Editing by Ramya Venugopal and Jonathan Hopfner)