Legend, property unit advance date for double listing
Bien Perez in San Francisco
Mainland investment holding company Legend Holdings and its property arm, Raycom Real Estate, will both pursue initial public offerings at the same time, between 2014 and 2016.
Liu Chuanzhi, Legend chairman and president, said a simultaneous listing was preferable to having the parent firm and its subsidiary list separately.
The strategy was drawn up after Beijing-based Legend, parent of computer giant Lenovo Group, recently decided to accelerate its listing on the Hong Kong stock exchange ahead of an earlier planned target date of between 2015 and 2017.
Raycom, which was formed in 2001 and has total assets of more than 10 billion yuan (HK$11.85 billion), is expected to list on the mainland.
In an interview on the sidelines of a speaking engagement on Friday with the Institute of East Asian Studies at the University of California, Berkeley, Liu said Legend's goal was to establish more 'good, core assets before the IPO'. The listing assets comprise companies in which Legend has control, or 50 per cent or more of its equity.
'We need to make sure these companies are going to be businesses that will continue to see around 30 per cent annual profit growth or more for at least three years after an IPO,' Liu said.
The ambitious double IPO plan reflects Liu's strong confidence in the performance and business prospects of Legend's five subsidiaries on the mainland.
In the first nine months of 2010, Legend said it posted total revenue of 103.7 billion yuan and had total assets worth 112.1 billion yuan. The company has more than 40,000 employees worldwide through its five subsidiaries: Lenovo, information-technology services provider Digital China, Raycom, venture capital firm Legend Capital, and equity investment and management company Hony Capital.
Lenovo, which was listed in Hong Kong in 1994 and acquired the personal computer business of International Business Machines for US$1.75 billion in 2005, recorded a 22 per cent year-on-year increase in revenue to US$5.8 billion in its fiscal third quarter to December. The world's fourth-largest supplier of personal computers also seized a record high 32 per cent market share during that quarter on the mainland, which is the world's second-largest and fastest-growing market for computers.
Digital China, the nation's largest integrated information-technology services provider which listed in Hong Kong in 2001, has estimated that its revenue, operating profit and earnings per share posted compound annual growth rates of 26.07 per cent, 32.73 per cent and 29.90 per cent respectively over its past five financial years.
For the six months to September, Digital China's turnover was up 12.65 per cent to HK$27.56 billion from a year earlier.
Raycom has more than 10 regional subsidiaries, over 500 employees, almost four million square metres of reserved land, and more than 400,000 square metres of premium property assets. Its strategic coverage includes Beijing, Tianjin, Chongqing, Wuhan, Changsha, Hefei, Yixing, Wuxi, Jiangxi and Jiangyin.
Liu last year announced a programme to invest around 10 billion yuan in companies based in strategic industries.
'We've looked at companies, for instance, that use coal to produce different products,' Liu said. 'We've also looked at companies involved in modern agriculture and services. We did not just choose these out of a hat. We decided on them after discussions about which lines of business have the best prospects.'
Funding for new investments will initially be sourced from Legend Capital and Hony Capital.
Liu said Legend's two investment companies had been operating for about 10 years, so they were 'entering the time when returns are beginning to come in from the investments previously made'.
'In addition, we are going to be issuing some long-term debt,' he added, without providing details.
Legend's possible acquisition targets would be companies 'that will complement our business and may have distribution, technology or brands that we don't have', he said.