Fosun International plans investments in mainland pre-initial public offering firms
Mainland conglomerate Fosun International, whose shares will start trading today, plans to capitalise on its knowledge and relationships in privately owned enterprises by making more investments in pre-initial public offering companies.
'We're very optimistic about the mainland's burgeoning financial services sector, especially the investment opportunities for pre-IPO projects,' chairman Guo Guangchang said.
'There are plenty of good privately owned companies in the market and many of them want to launch initial public offerings, but still need to wait some time before their business scale is large enough. We can offer help, including capital and management.'
Fosun raised HK$11.54 billion by selling 1.25 billion shares at HK$9.23 each. It priced its offering at the top end of the indicative range as the retail portion was 233 times oversubscribed. The value of those shares surged 28 per cent to HK$11.84 in pre-market trade on Friday.
Mr Guo said Fosun would focus its investments on pharmaceutical and chemical companies.
He did not rule out the possibility of setting up a direct investment fund to conduct pre-initial public offering investments and said as an investor, Fosun would take part in the management of companies it invested in.
Fosun, the mainland's largest privately owned conglomerate, has two successful experiences in pre-offering investments.
The Shanghai-based company and its 18.2 per cent-owned Shanghai Yuyuan invested 329.4 million yuan in gold producer Zhaojin Mining in April 2004, when gold was less than US$400 an ounce, for a combined stake of 41 per cent.
The Shandong-based gold producer in December last year conducted a HK$2.5 billion offering in Hong Kong when the gold price was above US$600 an ounce.
Fosun and Yuyuan's stake in Zhaojin, diluted to 29.7 per cent, is worth HK$3.4 billion, based on Zhaojin's market capitalisation of HK$11.5 billion on Friday, producing a more than tenfold return for Fosun in less than four years.
'We've chosen the right time and the right industry to invest in which delivered a very good return to the company,' Mr Guo said.
Through its 49 per cent-owned Shanghai Fosun Pharmaceutical, Fosun bought a 21 per cent stake in Hisoar for 27 million yuan in January 2004. Hisoar completed its offering in Shenzhen and raised 312 million yuan in December last year.
Hisoar has a market capitalisation of 1.94 billion yuan, making Fosun's diluted stake of 15.7 per cent, worth 304 million yuan for another tenfold gain.
The conglomerate sees opportunities in non-state-owned companies
The amount Fosun International raised by selling 1.25b shares, in HK$11.5b
The number of times the retail portion of the initial public offering was oversubscribed 233