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Panva Gas issue yields $620.8m

Because of healthy demand, the firm raised the placement size by a third

Mainland piped-gas distributor Panva Gas Holdings raised about HK$620.8 million in a share placement yesterday, taking advantage of recent strength in the stock market.

Parent Sinolink Holdings sold 115.2 million shares, or 16.94 per cent of its stake, at HK$4 each to institutional investors and then subscribed to new Panva shares at the same price.

The sale price was a 17.94 per cent discount to the counter's close of HK$4.875 on Wednesday. Trade in the stock was suspended yesterday to pave way for the placement.

The placement size had been raised by one third due to strong demand, although the sale price was fixed at the low end of the indicated range of HK$4 to $4.30, according to the issue's sole book-runner and arranger Morgan Stanley.

The placement follows a US$50 million convertible bond issue in April, inflating Panva's war chest to $120 million to meet funding commitments for new projects.

'We have upsized the number of shares because of good demand from institutional investors. Institutional investors demand a more realistic price,' Morgan Stanley vice-president George Taylor said.

Panva's share placement is the latest and largest this week on the main board, following a HK$228.5 million placement from telecommunications software maker Champion Technology Holdings and a $302.4 million sale by eye-wear maker Moulin International Holdings.

Morgan Stanley managing director Liu Che-ning conceded the steep discount for the shares could lead to selling pressure when Panva resumed trading, but he said the sale price was equivalent to the counter's close two weeks ago. The share placement would double Panva's public free float to 25.6 per cent.

Mr Taylor said Panva would use the proceeds for projects the company had planned. In the past month or so, Panva has signed memoranda of understanding for five projects in Foshan, Sichuan and Harbin, which involve the supply of gas under franchise. The projects will be funded by proceeds from the placement and the convertible bond.

Managing director Wayne Chen Wei had said Panva would need 250 million yuan to fulfil its funding commitments for three projects in Sichuan by the next quarter.

Panva is expanding aggressively in China as it attempts to capitalise on the increasingly competitive piped-gas market as the mainland promotes the use of environmentally friendly natural gas through foreign investment.

The company primarily distributes piped gas in coastal cities.

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