Geely, chairman to raise HK$1.1b in placement

PUBLISHED : Wednesday, 20 May, 2009, 12:00am
UPDATED : Wednesday, 20 May, 2009, 12:00am


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Mainland carmaker Geely Automobile Holdings and chairman Li Shufu are raising as much as HK$1.1 billion through a share placement, taking advantage of the stock rally since the beginning of this month, market sources said.

The company offered yesterday to sell 570 million new shares at HK$1.33 to HK$1.38 each, translating into up to an 8 per cent discount to the firm's closing price of HK$1.45, according to a sale document obtained by fund managers.

Meanwhile, Mr Li will sell 230 million existing Geely shares, or a 3.3 per cent stake, with the same price terms for HK$317 million, the document shows.

The carmaker and Mi Li have agreed not to sell any shares within three months after the completion of the share sale. Macquarie Capital is a joint bookrunner.

Part of the proceeds will be used to fund Geely's purchase of Drivetrain Systems International in March and part of it might be spent on acquisitions, sources said.

Zhejiang-based Geely agreed to pay up to A$58 million (HK$339.42 million) - A$47.4 million in cash and the rest in assumed debt - for the Australian car parts maker.

Geely shares have gained 38 per cent over the past 12 days, beating the 12 per cent increase in the Hang Seng Index.

Two other listed vehicle stocks, Great Wall Motor and Denway Motors, advanced 13.64 per cent and 8.8 per cent, respectively, yesterday.

Traditional funds that had been shying away from the stock market and had a high cash position would be keen buyers of share placements, as would hedge funds seeking short-term profits from a discounted deal, market observers said.

The recent strong market sentiment has drawn companies back to the equity market for fresh money to strengthen their capital reserves.

China Resources Land, a major developer on the mainland, raised HK$4.3 billion by selling new shares to institutional investors on Monday. The deal was boosted by 30 per cent from the initial offer of HK$3.3 billion thanks to strong demand.

CR Land's stock has had a strong run over the past five months, gaining more than 50 per cent and reaching a 52-week high in early May.

Riding the wave

The current stock rally has drawn companies back to the equity market

Over the past 12 days, shares of Geely Automobile Holdings have gained: 38%