• Thu
  • Jul 31, 2014
  • Updated: 5:14pm

Machinery firm raises US$489m from stocks, bonds

PUBLISHED : Wednesday, 11 April, 2007, 12:00am
UPDATED : Wednesday, 11 April, 2007, 12:00am

Funds are for expansion, acquisitions


China Infrastructure Machinery Holdings, which makes construction equipment, and its chairman Li San-yim, raised US$489 million by selling shares and bonds convertible into shares, market sources said.


Mr Li sold 104 million shares at HK$15.15 each after marketing the shares at between HK$14.90 and HK$15.50. The final price represented a 7.17 per cent discount to last Wednesday's close of HK$16.32.


The shares Mr Li sold are owned through China Longgong, the largest shareholder in China Infrastructure. Longgong held a 59.9 per cent stake in the company before the sale, while the second-largest holder DBS Group Holdings owns 5 per cent.


China Infrastructure's shares have leapt 77 per cent this year while the Hang Seng Index has risen 1.9 per cent.


At the same time, China Infrastructure raised a larger than planned US$287 million from the sale of convertible bonds. The company had originally planned to raise US$230 million but the bond offering was enlarged on strong investor demand.


'Both books were covered before lunchtime after opening at 9am,' a source said.


The five-year bonds were priced to yield 3.875 per cent, after being marketed as high as 4.375 per cent.


Investors can sell the bonds back after three years, or convert them into shares after the company's share price rises 35 per cent higher than the HK$15.15 each that Mr Li's shares were sold at.


The share and bond sale represented 20 per cent of the total outstanding shares. Proceeds from the bond sale would be used to expand and make acquisitions, the market sources said.


'They're looking to expand their base plants in Shanghai and Fujian province as well as acquire companies that they have yet to identify,' a person close to the company said. 'It's a real fragmented industry and there's a lot of potential to buy.'


Morgan Stanley arranged both the share and bond sale.


Shanghai-based China Infrastructure said in February that it was in talks with a third party that could lead to a partial takeover.


Its profit for last year surged 165 per cent to 624 million yuan on better cost control while sales increased 39 per cent to 3.7 billion yuan.


The company hoped exports would account for 20 per cent of sales in five years with a gross margin of about 30 per cent. Such sales account for as much as 5 per cent now. Chief executive Qiu Debo said last year the Middle East and Russia would remain the focus of overseas sales.


The potential growth in sales was one reason cited by Morgan Stanley analysts in February when they initiated coverage of the stock with an 'overweight-v/in-line' rating. Plans to diversify its product lines were also cited.


Estimated capital expenditure is HK$1.5 billion this year. The company plans to produce 28,000 wheel loaders this year and 32,000 next year.


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