Fosun flows downstream to secure raw materials
Mainland conglomerate Fosun International plans to invest 900 million yuan in an iron ore project as part of its strategy to secure a stable raw materials supply for its core steel business.
Chairman and largest shareholder Guo Guangchang yesterday said that Fosun would use funds raised from its Hong Kong initial public offering to boost investments in steel, pharmaceuticals and financial services sectors, as well as companies listed in the A and H-share markets.
The Shanghai-based company, which earns more than 50 per cent of its profit from its steel business, has signed a preliminary agreement with Hainan Iron & Steel to set up a new unit for iron ore mining. Fosun will take a 60 per cent stake, according to its listing prospectus.
Fosun's 60 per cent-owned Nanjing Iron & Steel United also won approval from the National Development and Reform Commission to revive troubled steelmaker Tieben Iron & Steel in a deal that may involve as much as two billion yuan, the Economic Observer reported earlier this month.
Fosun, which owns stakes in at least five Hong Kong or Shanghai-listed firms, might spin off more subsidiaries in the future to unlock their market value, although there were no concrete plans at present, said Mr Guo.
According to its prospectus, Fosun will help its 19.7 per cent-owned Tebon Securities go public. Mr Guo said the acquisition of an additional 10 per cent stake in Tebon Securities was expected to be completed soon.
It is also studying acquiring other financial institutions, such as small to medium-sized commercial banks.
Dubbed 'Shanghai Hutchison' after the sprawling Hutchison Whampoa conglomerate, Fosun has received overwhelming demand from institutional investors.
Sources said Fosun's institutional portion had been 15 times oversubscribed - even after it revised up the price range more than 6 per cent to HK$6.98 to HK$9.23 from HK$6.48 to HK$8.68.
The firm is offering 1.25 billion shares to raise as much as HK$11.54 billion. Ninety per cent of the shares are for institutional investors and the rest for retail investors. Local brokerages estimate that Fosun's IPO might draw about HK$60 billion of margin financing from retail investors.