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HONG KONG, Sept 19 (Reuters) – The real estate services arm of developer China Vanke Co Ltd has launched Hong Kong’s largest initial public offering (IPO) of 2022, aiming to raise as much as $783.5 million in a deal that will be a major one Will be a test of investors’ appetites.
Subsidiary Onewo Space-Tech Service has set a price range of HK$47.1 to HK$52.7 per share for the public offering of 116.74 million of its shares, representing 10% of the company’s share capital, according to a deal term sheet.
The price range values Onewo at $7 billion to $7.8 billion.
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Vanke, China’s second-largest real estate developer by revenue and listed on both Shenzhen and Hong Kong stock exchanges, owns 62.9% of Onewo and is its largest customer, according to regulatory filings.
The deal is likely to show how much appetite investors have to get into the services and management subsector linked to China’s cash-strapped real estate market, which has spiraled from crisis to crisis over the past year.
While a number of Chinese developers have defaulted on offshore debt during this period, Vanke has weathered the crisis better than its peers, thanks in part to lower debt-to-equity ratio and partial government ownership.
Once Onewo’s shares debut on the Hong Kong Stock Exchange, its performance is also likely to influence the prospects of other real estate services companies looking to raise capital through public offerings.
The Hang Seng Property Services and Management Index (.HSPSM) is down 44.3% so far this year, reflecting ongoing weakness in the real estate sector.
Some service companies have made efforts to lend money or raise funds for their parent companies. Investors have viewed such moves with skepticism.
In August, shares in property manager Jinke Smart Services Group (9666.HK) fell 37% in a day after it announced it would lend up to $222.3 million to parent company Jinke Property (000656.SZ).
Onewo’s IPO would not aim to increase liquidity for Vanke, Yu Liang, chairman of the parent company, said on Aug. 31. The subsidiary accounts for only 1% to 2% of Vanke’s assets and profits, Yu added.
SCALED BACK
Volatility in global financial markets caused Onewo’s IPO to be scaled back from an initial goal of raising up to $2 billion, people familiar with the matter previously told Reuters.
Onewo said it plans to use funds from the IPO to expand its existing businesses, update its software and take controlling stakes in three to five “value-added” service providers in its industry.
The IPO deal has participation from six cornerstone investors who have collectively subscribed for up to $280 million in shares, the filings showed. Such investors include China’s Mixed Ownership Reform Fund, China Chengtong Investment and UBS Asset Management.
The final IPO price will be set on September 22nd; Public trading in the shares is scheduled to begin on September 29.
The deal is also a boost for the Hong Kong stock market.
Amid China-US tensions and a tightening regulatory environment in China, companies have only invested $2.42 billion in 2022 so far.
Onewo’s deal will become Hong Kong’s largest IPO of 2022, dwarfing that of Huitongda Network Co Ltd (9878.HK), which raised $297 million in February.
Hong Kong’s two biggest stock deals this year — China Tourism Duty Free Corp’s $2.1 billion share sale and Tianqi Lithium’s $1.7 billion sale — were secondary listings. Both companies were already listed in mainland China.
($1 = 7.8490 Hong Kong dollars)
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reporting by Scott Murdoch; additional reporting by Clare Jim; Edited by Sumeet Chatterjee and Bradley Perrett
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Scott Murdoch
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