Sun Hung Kai Properties is set to purchase a minimum of 10% of the forthcoming IPO of Hopewell Highway Infrastructure (HHI). The property company joins Bank of China as one of two strategic investors in the 720 million share deal, which prices at the end of this month.
The company's participation is not that surprising in the light of its bid for the 29km bridge linking Hong Kong to Macau and Zhuhai. HHI and SHK are widely believed to be bidding together in a consortium, which also comprises Henderson Land, Shun Tak Development and New World Development.
The Kwok family, who own SHK and the Wu family behind Hopewell have also recently become closer because of the latter's decision to push further into areas of the former's homeland in the Pearl River Delta. In particular, HHI is beginning to construct phase two and three of the Western Delta Route between Guangzhou and Zhongshan, a 42km stretch of road.
SHK's participation in the IPO should give ambitions to price the deal at a premium to the sector a further boost. In addition, the terms of an outstanding loan agreement give Bank of China the right to purchase 5% of the flotation at issue price.
Lead manager Citigroup has also done its best to maximise distribution channels and encourage higher pricing by incorporating a POWL (public offer without listing) in Japan, which will take up a further 10% of the offering.
Roadshows for the deal began in Singapore this Monday and will hit Hong Kong today (Wednesday). The transaction is currently being marketed on a price range of HK$4.03 to HK$5.28 per share, equating to a P/E ratio of 18 times 2003 earnings at the top end of the range.
The deal could raise proceeds of up to $487 million. Alongside the lead, BOCI will act as joint lead, with BNP Paribas Peregrine, JPMorgan and Morgan Stanley as co-leads. Co-managers comprise CLSA, ING and UOB. Daiwa SMBC will handle the POWL.
