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UPDATE 2-Sunshine Oilsands prices $579 mln Hong Kong IPO at bottom
February 24, 2012 / 8:01 AM / 6 years ago

UPDATE 2-Sunshine Oilsands prices $579 mln Hong Kong IPO at bottom

* IPO priced at HK$4.86/share, bottom of indicative range

* Canadian oil explorer’s offering largest in HK since Dec

By Elzio Barreto

HONG KONG, Feb 24 (Reuters) - Oil explorer Sunshine Oilsands Ltd has priced its $579 million Hong Kong IPO at the bottom of an indicative range, in the latest sign that investors are not ready to buy into the mountain of new listings piling up in the Asian financial hub.

The Calgary-based company is selling 923.3 million new shares at HK$4.86 each, a source with direct knowledge of the deal told Reuters on Friday, putting the total deal at HK$4.49 billion ($579 million). The source was not authorised to speak publicly on the IPO details.

The company had marketed the offer at an indicative range of HK$4.86-HK$5.08 per share, seeking to raise up to $700 million including a greenshoe option to meet additional demand. It could not be reached for immediate comment.

Sunshine Oilsands came to market with the biggest IPO in Hong Kong since the $1.9 billion New China Life Insurance Co Ltd dual listing in the city and Shanghai in December.

Ten companies have gone public in Hong Kong since the beginning of the year, mostly small deals that raised a combined HK$3.3 billion, according to stock exchange data.

Others, such as China Everbright Bank Co Ltd and construction giant Sany Heavy Industry Co Ltd, have also revived Hong Kong listing plans, looking to benefit from the benchmark Hang Seng Index’s 16 percent rally since the beginning of the year.

“People are not very convinced to go buy IPOs, even though we had a very strong performance in the index,” said Alex Wong, director of asset management at Ample Finance.

“The general perception is that the market could be very volatile. From last year’s experience, we could have a very sharp turn in a very short period of time,” he added.

Sunshine Oilsands had raised about $230 million in March last year from a group of investors including a unit of Bank of China, China Life Insurance (Overseas) and Hong Kong private equity fund Cross-Strait Common Development Fund.

Commitments from three cornerstone investors, including sovereign wealth fund China Investment Corp (CIC), covered nearly 60 percent of the IPO, helping offset tepid demand from retail investors.

Besides CIC, China Petrochemical Corp (Sinopec Group), parent of listed China Petroleum & Chemical Corp (Sinopec)

and Washington-based asset manager EIG Global Energy Partners pledged a combined $350 million worth of shares in the offering.

In Hong Kong, more than 80 issuers had active IPO applications through the end of January, with London-based high-end jeweller Graff Diamonds among them. Still, lingering concern over Europe’s debt troubles and a slowdown in China’s economy have prompted bankers to rely more on ‘shadow books’ to make sure offerings get completed.

The IPO pipeline in Hong Kong could reach nearly $8.4 billion in the first half of 2012, according to figures from Thomson Reuters publication IFR, if demand for new issuance improves. Demand for new issuance since the beginning of the year has been weak, casting doubt on coming deals.

“This year, the IPOs were small and the subscription wasn’t really well received,” Ample’s Wong added.

The company, which owns 1.14 million acres of oil sand leases in the Athabasca region in Canada’s Alberta province, plans to use 64 percent of the IPO proceeds to develop its West Ells project, with another 29 percent of the funds going to other smaller projects and on drilling.

BOC International, Deutsche Bank AG and Morgan Stanley are joint global coordinators and joint sponsors of the IPO.

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