AviChina Industry & Technology, an aircraft and components manufacturing conglomerate, has raised at least HK$698 million by selling new shares to institutional investors and will use the proceeds to fund potential acquisitions.
The Hong Kong-listed arm of state-owned Aviation Industry Corporation of China (Avic) sold 196.7 million new shares at HK$3.55 each, a 12.6-per-cent discount to its last traded price of HK$4.06, a term sheet sent to investors said. A person familiar with the deal said the order book had been covered.
If demand exceeds the shares on offer, AviChina has an option to sell another 65.5 million shares to raise an additional HK$232.5 million.
Trading of AviChina shares was suspended yesterday pending completion of the share sale. Its share price has more than doubled since bottoming at HK$1.98 in late September, when the equity market was troubled by the European sovereign debt crisis.
The shares were to be sold to not more than 10 investors who pledged not to sell the shares for at least three months. BOC International was the sole book-runner.
The proceeds will fund possible acquisition of aviation assets and general operational use.
Strategic partner European Aeronautic Defence and Space will subscribe to the offer to maintain its 5 per cent stake in Avic, the term sheet said.
The company became a purely aeronautical equipment maker in 2009 after it sold its mini-vehicles business to its parent, in exchange for the latter's avionics electronics business. In 2010, management said it intended to gradually buy all of its parent's aviation equipment operations that are run by over 20 companies.
AviChina aims to raise its sales to 500 billion yuan (HK$615.2 billion) in 2015 from 205.5 billion yuan in 2010. Most of its revenues came from vehicle manufacturing and property development. It had 500 billion yuan of assets in the middle of last year.
Vice-chairman Tan Ruisong said in 2010 the AviChina asset injection plan included its parent's most profitable unit, Shaanxi province-based and Shenzhen-listed Avic-Xian Aircraft International, which makes mid- and large-sized aircraft. It also supplies components for Western aircraft-makers Airbus and Boeing.
The injection plan also included its parent's heavy-lift helicopter and jet engine manufacturing operations. Heavy-lift helicopters is a segment in which mainland aircraft makers lag Western rivals. China relies on American or Russian-made helicopters for heavy-lift work, like disaster rescues.
AviChina's aviation equipment operations last year posted this much net profit in the first half, in yuan