Guodian Technology and Environment Group has postponed the pricing of its initial public offering as the company has decided to adjust the offer structure, a source said. The company was seeking to raise between HK$4.49 billion and HK$5.03 billion ($578 million to $647 million) and was set to fix the price yesterday after closing the order books on Wednesday.
The deal will be downsized to ensure it will be done properly, and the pricing is expected in the second half of next week, the source said. The company is finalising legal documents and needs to get clearance from the stock exchange, but the target is still to complete the deal before the end of the year, the source added.
Beijing-based Guodian Technology, which is part of the China Guodian Group, is the biggest provider of environmental protection and energy conservation solutions for coal-fired power plants in China, and also makes renewable energy equipment. It generates about 50% of its revenues from environmental protection and energy conservation businesses, while most of the rest of its top-line income comes from wind power equipment.
It was aiming to sell 2.08 billion shares, or 30% of its share capital, at a price between HK$2.16 and HK$2.42 apiece.
There was no immediate information about the level of demand, but the fact that the pricing was postponed obviously suggests that the deal wasn’t fully covered – even though it had cornerstone demand for $210 million worth of shares.
Earlier this week, Haitong Securities, a Chinese brokerage firm that is already listed in Shanghai, pulled its Hong Kong IPO after failing to attract sufficient interest. It had been trying to raise between $1.5 billion and $1.7 billion
Investors have been cautious towards IPOs as the secondary market remains volatile and numerous other new listings are trading below issue price. And there was more bad news on that front yesterday when Chow Tai Fook Jewellery and New China Life Insurance dropped nearly 10% on their first day of trading. The Hang Seng Index was hurt by continued worries about the eurozone debt crisis and a weak economic report in Japan and fell 1.8%.
However, even before the trading started yesterday, the index had fallen 3.9% since Chow Tai Fook fixed its price last Friday morning and was down 4.6% since New China Life priced early Thursday. Their closest comparables had slumped between 10% and 12.4% in the same period.
Chow Tai Fook, which raised $2 billion from its Hong Kong IPO, dropped 8% to HK$13.80, while New China Life’s H-shares lost 9.8% to finish at HK$25.70. New China Life raised $1.9 billion from an IPO in Hong Kong and Shanghai. Its A-shares will start trading in Shanghai today.
Still it could have been worse. China Polymetallic, a lead, zinc and silver miner that raised $143 million from its IPO, fell 40% on its first day of trading on Wednesday. And Baoxin Auto Group, a luxury auto dealer that sold $414 million worth of shares before the listing, lost 14%.
These four companies all priced their deals either at or near the bottom of their indicative price ranges and they drew little enthusiasm from retail investors.
Guodian Technology had signed up five cornerstone investors to help it get across the line. The five investors had committed to buy $210 million worth of shares, or 36.3% of the deal at the bottom of the price range.
The biggest contributor is private equity fund SAIF Partners, which has agreed to invest $80 million. China High Speed Transmission Equipment Group, a Hong Kong-listed manufacturer of wind power transmission gear that is a supplier to Guodian Technology, will take up $40 million worth of shares.
The other three cornerstones are also strategic in nature and will each invest $30 million. They are: wind power producer China Datang Renewable, power generator China Huadian Corp, and transmission company State Grid.
Just a day before Guodian Technology’s original pricing date, Xinjiang Goldwind Science & Technology also announced that it will buy shares in Guodian Technology for up to $15 million. With the move, it aims to consolidate the strategic cooperation in the wind power industry between the two companies.
The IPO price range valued Guodian Technology at 8.5 times to 9.5 times its earnings for 2012 on a pre-greenshoe basis. Due to the diversified nature of its business, it was being compared to a blend of companies. The biggest influence was viewed to be international environmental protection and energy conservation companies, which trade at forward price-to-earnings multiples in the low- to mid-teens.
The company had set aside 10% of the deal for Hong Kong retail investors and was offering the remaining 90% to institutional investors. The deal comes with a 15% greenshoe. All the shares are new.
CICC and UBS are joint global coordinators, and RBS joins them as a bookrunner.
Beijing Jingneng
Meanwhile, Beijing Jingneng Clean Energy yesterday evening fixed the price of its Hong Kong IPO at the mid-point of the indicated range, at HK$1.67 per share, for a total deal size of HK$1.9 billion ($244 million).
The company, which operates gas-fired and wind-powered electricity generating plants in China, had originally sought to go public in June but called off the deal after failing to get much traction with investors. To ensure a better outcome this time, the company and the bookrunners had secured enough demand to have the entire deal covered when it opened the order books on Monday. The buyers are believed to have been mainly Chinese corporates and some institutional investors.
The pre-launch demand also included $140 million from four cornerstone investors: SAIF Partners, which bought $50 million worth of shares, and Goldwind New Energy, Everbright Private Equity and China Aerospace Science and Technology, which invested $30 million each. They are all subject to a six-month lock-up.
According to a source the company received a modest amount of incremental demand from institutional investors during the bookbuilding. Retail investors subscribed to only 5% to 6% of the 10% of the deal set aside for them.
Beijing Jingneng offered 1.135 billion shares at HK$1.59 to HK$1.75 apiece. The final price translates into a 2012 price-to-earnings multiple of 7.45, which according to sources puts it at a discount to its peers. On Monday this week one source said that wind farm developers trade at an average 2012 P/E of about eight to 10.4 times, while Chinese thermal IPPs (independent power producers) trade at an average of 11.6 times.
The deal comes with a 15% greenshoe that could increase the total proceeds to $280 million if exercised in full. Just over 90% of the shares are new.
Barclays Capital, BOC International, Goldman Sachs, Macquarie and UBS, which were also on the ticket in June, were joint bookrunners this time around as well, but were being joined by Bocom International, China Merchants Bank and Daiwa.
The stock will start trading on December 22.
