While a decision to allocate the majority of shares from its HK$9 billion ($1.2 billion) H-share offering to cornerstone investors came as no surprise, Everbright Securities has raised eyebrows by listing two overseas insurance firms among the buyers.
British insurer Prudential and Taiwan’s Mercuries Life Insurance are among the eight cornerstone investors that have agreed to subscribe to 65% to 73% of the deal depending on final pricing. Prudential is investing $30 million while Mercuries Life will take $20 million of shares, according to a termsheet seen by FinanceAsia.
By comparison, domestic rival Orient Securities lined up an all-Chinese set of cornerstone investors for its June H-share offer.
China Life is also among the cornerstone investors and has agreed to subscribe to $80 million worth of Everbright Securities’ H-shares, a move which suggests insurance companies are keen to enter into long positions amid improving investor sentiment on Hong Kong stocks.
On Monday, the city’s benchmark Hang Seng Index advanced 1.6% to close at the highest level since November on the back of strong jobs data in the US. It has gained 8.2% since Britain’s vote to leave the European Union on June 23, indicating that Brexit fears are no longer weighing on investor sentiment.
The other cornerstone investors include China Shipbuilding, China State Construction Engineering Corp and Hengjian International, which will each inves $182 million. BoCom International will take $50 million and Dazhong Transportation $30 million of shares.
Terms
Everbright Securities will be selling 680 million H shares at an indicative price range of HK$11.80 to HK$13.26 per share. On a pre-shoe basis the deal accounts for 14.83% of the brokerage’s total share capital.
There is a standard 15% greenshoe option of 100 million shares to potentially increase the free float to 16.64%.
Based on syndicate consensus estimates, Shanghai-based Everbright Securities will be valued at 0.94 times to 1.05 times net book value of Rmb42 billion ($6.3 billion) by the end of this year. On a historical basis it will be valued at 0.98 times to 1.1 times book value as of the end of last year.
Depending on final pricing, Everbright Securities’ H-shares will be offered at a 32% to 40% discount to its Shanghai-listed shares. The discount range is much narrower than its local competitor Orient Securities, which sold its H-shares at 56% to its A-shares during its H-share offering in June.
Everbright Securities president Xue Feng said the company was actively expanding its offshore business to offset the decline in brokerage commission for its China business. As a result the management roadshow is also targeting New York and Toronto in addition to Hong Kong and Singapore.
The H-shares are set to begin trading on August 18.
China Everbright Capital, UBS and Bank of America Merrill Lynch are joint sponsors of the Hong Kong share sale.
