China Communications Construction (CCC), the country’s biggest port builder, raised Rmb5 billion ($793 million) on Thursday after offering shares at the top end of the indicated price range.
The company had to cut the size of the offering by as much as 75% from its initial plans, but CCC’s deal is nevertheless the biggest Shanghai initial public offering so far in 2012 and is likely to be one of the biggest of the year.
CCC, which is already listed in Hong Kong, sold 1.35 billion shares at Rmb5.4 each, the higher end of a price range that started at Rmb5. The final price implies a price-to-earnings ratio of 7.6 times, based on its estimated 2011 earnings, the company said in a statement to the Shanghai Stock Exchange.
The price represents an 8.9% discount compared to CCC’s Hong Kong-listed shares, which traded at an average price of Rmb5.93 (HK$7.30 before conversion) during the previous 20 days. That makes the deal slightly cheaper than CICC’s estimate. China’s leading investment bank had said in a report that a “reasonable” price for CCC’s IPO would be between Rmb6 and Rmb7.8.
The company placed 16.68% of the offering to institutional investors and 30.5% to retail investors, while three strategic investors — China Shipping Investment, Sany Heavy Industry and Shanghai Port and Shipping Equity Investment — took 13.7% of the deal. Some 7.58% of the deal was sold through standby underwriting.
CCC will also swap about a third of the total offering for shares in Road and Bridge International, which is a Shanghai-listed company in which CCC owns a 61.4% stake.
CCC trimmed its target IPO size to Rmb5 billion from an initially planned Rmb20 billion amid weak demand for new equities in China. The company plans to use the proceeds from the share sale to buy equipment and fund nine construction projects — which will cost Rmb45 billion in total. It will meet the shortfall through other funding channels.
The company said it will list its shares on the Shanghai exchange soon, without giving details. BOC International and Guotai Junan Securities are bookrunners.
Jishi Media, a Chinese cable TV company that completed its IPO on Monday last week, also had to cut the size of its offering — scaling back to Rmb1.96 billion ($311 million) from an original target of Rmb 2.2 billion. Citic Securities managed the deal.
Jishi recorded average annual profit growth of 208% during the period of 2008 to 2010 period, helped by a government-led campaign to upgrade the country’s analogue TVs to digital, the company said.
There are a handful of billion-dollar IPOs waiting in the pipeline in Shanghai. Shaanxi Coal Industry has received the nod from the regulator for a $2.7 billion share sale. China Railway Materials Commercial’s $2.3 billion offering and Bank of Shanghai’s $2.8 billion IPO are expected to come to market later this year.
However, small deals are most likely to dominate the IPO market during 2012, which means that big domestic investment banks such as CICC will have to turn to deals that it would have previously ignored, according to one source. The firm, which used to focus exclusively on mega deals, is facing increasingly strong competition from smaller peers. It has been reported that CICC will post a 70% drop in 2011 net profits.
