With less than two months left before the year-end break, companies of all sizes keep coming to market to make the most of the IPO frenzy that routinely takes place in Hong Kong towards the end of each year.
Leoch International Technology, a Chinese lead-acid battery manufacturer, kicked off bookbuilding Tuesday for an up to HK$1.78 billion ($230 million) IPO.
The company is based in Shenzhen just across the border from Hong Kong, and is one of the largest lead-acid battery exporters in China with a 5.8% market share, based on export revenues in 2009. It makes more than 1,500 different types of batteries, including reserve-power, starting, lighting and ignition types, which are used in telecommunication systems, automobiles, motorcycles, renewable energy storage systems, and other consumer and industrial products, the company said in a preliminary IPO prospectus.
It has a handful of major customers, including China Mobile, China Unicom, China Telecom and ZTE, a Chinese telecom equipment maker, which together contribute a significant portion of the company's revenues. That suggests Leoch’s business could be badly impacted if it loses any of its big customers.
Leoch is offering 25% of its share capital in the form of 333.33 million new shares at an indicative price of HK$3.75 to HK$5.35 apiece. The price range indicates the company could raise between HK$1.25 billion and HK$1.78 billion ($160 million to $230 million). But the deal could stretch to as much as $264 million if a 15% greenshoe option is fully exercised, which would allow the company to sell an additional 50 million new shares.
About 90% of the base deal will be offered to institutional investors, while the remaining 10% has been earmarked for the Hong Kong public offering. The split is subject to the standard Hong Kong IPO clawback mechanism.
The Hong Kong public offering will start on November 3 and close on November 9, with the pricing set to take place later that same day. The trading debut is scheduled for November 16. BOC International and Citi are joint bookrunners.
Leoch will use 60% of the net proceeds to expand its production capacity. The company has recently acquired a plot of land near the Anhui production facility, which it intends to use for the production of battery products. It will use 10% of the net proceeds for research and development of new products using new technologies, particularly spiral pure lead technology, and for improving existing products and technologies.
Leoch made Rmb145.3 million ($21.7 million) of net profits in 2009 and Rmb127 million in the six months ended June 30, 2010.
Another listing hopeful, Jiangsu Rongsheng Heavy Industries, which is seeking to raise up to $1.5 billion from a Hong Kong IPO, may start its roadshow as early as next Monday, according to sources.
It is the Chinese shipbuilder’s second attempt to go public. It first approached the Hong Kong market in 2008 with an aim to raise $2 billion, but it later scrapped the plan due to volatile market conditions.
J.P. Morgan and Morgan Stanley are handling the Rongsheng transaction.
