Zhong Wang plans US$500m initial share sale

PUBLISHED : Monday, 19 January, 2009, 12:00am
UPDATED : Monday, 19 January, 2009, 12:00am

Zhong Wang Group, one of the mainland's biggest aluminium and vinyl production companies, plans to raise at least US$500 million in Hong Kong in the next three months.

The deal is expected to be one of the biggest initial public offerings in the region during the first half amid the sluggish market.

The offering would build up a new funding channel that could allow Zhong Wang to finance several huge capital expansion projects in the coming years, market sources said.

The company originally mandated mainland investment bank Citic Securities and UBS as the deal's sponsors, and another two banks, JP Morgan and HSBC Holdings, later joined the syndication group, the sources said.

Zhong Wang will have its listing hearing after the Lunar New Year while the timetable of the formal launch has yet to be determined.

The share offer 'is certainly on the table even though the market has seen no significant improvement so far,' one source said.

'Everybody is working hard on it, but we're going to wait until the sentiment turns positive.'

Liaoning-based Zhong Wang operates 66 production lines on the mainland and manufactures aluminium and vinyl profiles for residential, construction and industrial usage.

'The company is cash-rich and faces no urgent need for fresh capital, but a listing in Hong Kong would definitely help improve its corporate image and broaden the investor profile,' a source said.

Zhong Wang's annual capacity of aluminium and vinyl profiles was 500,000 and 400,000 tonnes, respectively, in 2007.

'The market changes every day and what we can do is to test the waters,' another source said. 'Fortunately, investors do not seem to be shying away from new offerings and they are still keen to buy new listings at a very low price.'

Global initial share offerings soared to a record high in 2007 but the market environment turned grim last year in the face of the credit crisis, which has squeezed liquidity, diminished wealth and sent stock markets tumbling.

This has severely affected both retail and institutional investors' confidence and willingness to buy into new listings.

Data from Dealogic shows that 298 initial public offerings were either postponed or withdrawn globally last year, compared with 167 in 2007.

Accounting firm PricewaterhouseCoopers (PwC) expects this to be another sluggish year for Hong Kong's initial public offering market but also sees improvement if the mainland economy recovers.

PwC forecast the amount of capital generated in the initial share sale market would rise to HK$70 billion from HK$66 billion last year and the number of newly listed firms to increase to 35 from 29.

More than 80 per cent of the new offers could be from mainland-related companies.

Slump to persist

PwC expects another sluggish year for the Hong Kong IPO market

Amount of capital forecast to be raised this year from initial share sales, in HK$: $70b