Two Chinese retail players have decided to press ahead with their Hong Kong IPO plans despite the weak market sentiment. Ten Fu Tea, a Chinese tea company, hopes to bag around $300 million through a new share sale, while Hongguo International, a Chinese shoemaker, plans to raise around $250 million, according to sources.
The two companies are likely to join Citic Securities, XCMG Construction Machinery, Sany Heavy Industry and New China Life, which are also seeking Hong Kong listings in the next couple of months.
Citic Securities, China’s biggest brokerage firm, plans to sell shares in a deal that could allow the company to raise around $3 billion. New China Life is targeting $4 billion in a Hong Kong IPO, while Sany and XCMG, both listed in the A-share market, are looking for a combined total of $5 billion.
XCMG has received the nod from the China Securities Regulatory Commission to issue no more than 593 million shares in a Hong Kong IPO, the company said in a statement.
Ten Fu Tea specialises in the manufacture, sale and research of tea products in China, including popular strains such as pu-erh and longjing. People familiar with the situation said the company is confident in its offering plan because Chinese people continue to drink tea even when markets are falling. Even so, Ten Fu will still need to offer compelling valuations to attract enough demand.
Ten Fu, which has most of its operations in mainland China, is a unit of the Ten Fu Group, which was founded by Taiwanese businessman Lee Rie-Ho in 1993. Lee comes from a family that has been in the tea business for generations in Taiwan.
Ten Fu Group currently has 1,088 chain stores in China. The company also runs two tea museums, which it says enhances China’s tea culture by educating people about the health benefits of tea. The group has tea factories in Fujian and Sichuan, and claims on its website to be the biggest tea conglomerate in the world.
China had 60,000 to 70,000 tea companies in 2000, but roughly half of them have closed during the past decade. The remaining tea firms have an average profit margin of 15% to 20%, according to China’s tea marketing association.
Ten Fu has hired China International Capital Corp and Credit Suisse to manage the deal.
Hongguo makes and sells women’s footwear for international brands such as Nine West and Guess. The company plans to start marketing its IPO next week. Citi and DBS have been appointed to handle the deal, a source said.
The Nanjing-based company delisted from Singapore’s exchange in May 2010, when the company said privatisation would provide greater flexibility.
