Bawang delays IPO with sponsor change

PUBLISHED : Wednesday, 09 July, 2008, 12:00am
UPDATED : Wednesday, 09 July, 2008, 12:00am

Bawang International, a mainland personal care product maker and distributor, has replaced Goldman Sachs with Morgan Stanley as the sponsor of its Hong Kong listing, a move that will delay the deal to next year, sources say.

Guangzhou-based Bawang, whose products include shampoo, planned to raise about US$200 million from its first overseas share sale to expand on the mainland and in Hong Kong, one source said.

The company had submitted a formal listing application to the Hong Kong stock exchange but would need to re-file because of the change in sponsor, the source said.

'It usually takes six to nine months to complete a listing, so [Bawang's] offering could only come to the market in the first quarter of 2009 at the earliest,' the source said. 'Fortunately, it will help the company to skip the worst period for initial public offerings that I have ever seen in the Hong Kong equity market.'

The adverse conditions in the market, a result of concerns about the turmoil in global financial markets and Beijing's tightening policies, have prompted many companies to delay deals.

Of the 18 stocks listed this year, only a few are trading above their offer prices.

Bawang, which operates on the mainland, in Taiwan and Macau, started to tap the Hong Kong market at the start of the year to boost its corporate image and sales.

It is too early to estimate Bawang's market value, but shares in Shanghai Jahwa Corp, a Shanghai-listed hair care and skin product maker, are trading at 41 times earnings for this year.

Between 2001 and 2006, the mainland personal hygiene product market increased at an average annual rate of 10.4 per cent but was led by foreign firms.

In 2006, the leading company in the market was Unilever, followed by Henkel and Procter & Gamble, according to market research.

In China, P&G was a market leader in almost all its categories with 50 per cent of the shampoo market by value and 40 per cent of the personal hygiene market.

Annual sales in the mainland's shampoo market is about 20 billion yuan (HK$22.77 billion), with 70 per cent carved out by P&G, Unilever and C-Bons Group, a domestic brand bought by German company Beiersdorf last year.

Bawang has hired movie star Jackie Chan as spokesman. Its market share rose to 5.1 per cent last year from 0.7 per cent in 2005, according to AC Nielsen.

On the shelf

Morgan Stanley will replace Goldman Sachs as sponsor

The personal care product maker and distributor plans to raise, in US$: $200m