Mando China has decided to postpone its Hong Kong initial public offering, which was expected to raise between $213 million and $270 million. The company is a wholly owned subsidiary of Mando Corp (commonly referred to as Mando Korea) and one of the leading suppliers in China of chassis-related auto parts.
Mando China said in a filing to the Hong Kong stock exchange on Friday that the company and Mando Corp have decided to postpone the planned global offering and listing of the company “due to adverse market conditions that have developed since the start of the global offering, and which led to significant market volatility”.
But they “remain committed to proceed with the listing of the company in the future, when market conditions have improved, to unlock the true value of the company, and will continue to monitor market conditions to assess the appropriate window for listing”.
Mando China, which started the bookbuilding on May 15, was due to price the deal on Friday (May 24). The trading debut was slated for May 31.
The decision to call off the deal came after Asian stock markets plunged on Thursday, which was the last day of the bookbuilding. The losses were led by a 7.3% drop in Japan’s Nikkei average, and the Hang Seng Index also fell 2.5%, as investors were spooked by weak manufacturing data out of China and talks that the US may scale back its stimulus earlier than expected. The Nikkei recouped some ground with a 0.9% gain on Friday, but the Hang Seng Index extended losses to end 0.2% lower.
One source noted that the “right” investors came into the deal, but the size of their orders was a bit small to make it a successful transaction.
Mando China is the first company this year to either postpone or withdraw a new listing in Hong Kong, according to Dealogic. A total of eight companies either withdrew or postponed their deals last year, the data show.
Although the response was good, other products on the road ended up stealing some of the attention, a second source said on Friday. Investors also became nervous when markets fell at the last minute, the person said, adding that the deal will come back another time when investors can give it due attention.
Indeed, May has turned out to be a busy time for Hong Kong IPOs, after months of muted activity. Investors were paying particularly close attention to the two billion-dollar deals from China Galaxy Securities and Sinopec Engineering that are the biggest IPOs in Hong Kong so far this year.
Mando China launched its deal on the same day that Galaxy Securities priced its $1.1 billion offering and one day ahead of the pricing of Sinopec Engineering’s $1.8 billion IPO. Strong retail demand triggered a clawback on both deals, which resulted in retail investors being allocated 30% of the Galaxy Securities offering and 7.5% of the Sinopec Engineering deal.
Sinopec Engineering was also affected by the poor market on Thursday, however, as the sell-off coincided with its first day of trading. The stock opened higher, but finished the day down 0.4%. It gained 0.6% on Friday to HK$10.52 — two Hong Kong cents above the IPO price.
Galaxy Securities, which gained 6% in its debut on Wednesday, fell 1.8% the next day. It rose 0.7% to HK$5.56 on Friday, which left it 5% above the issue price.
Mando China was offering 243.4 million shares at a price between HK$6.80 and HK$8.60 each. The price range translated into a 2013 price-to-earnings ratio of 7.5 times to 9.5 times. Ten percent of the deal was earmarked for the Hong Kong public offering, while the remaining 90% was targeted at institutional investors.
The deal size represented 30% of the company, and the offering consisted of 75% secondary shares that were to be sold by Mando Korea and 25% new shares.
Mando China is one of the leading suppliers in China of chassis-related automotive parts, primarily brake, steering and suspension components and systems, according to the company’s prospectus. It sells its products primarily to the China operations of global vehicle manufacturers, such as Beijing Hyundai, Dongfeng Kia and Shanghai GM, as well as to local Chinese vehicle manufacturers, such as the Geely companies, Chery Automobile and Changan.
Deutsche Bank and Morgan Stanley were joint global coordinators and bookrunners for the IPO.
