Zhengzhou Coal seeks approval for shares to be sold at a discount

Cheaper price needed to lure HK buyers amid slowdown and debt crisis in Europe

PUBLISHED : Friday, 28 September, 2012, 12:00am
UPDATED : Friday, 28 September, 2012, 3:53am

Zhengzhou Coal Mining Machinery is seeking regulatory approval to sell shares in Hong Kong at a more than 10 per cent discount to its Shanghai-traded stock, two people with knowledge of the matter said.

Zhengzhou Coal, the country's largest maker of hydraulic roof supports used in mining, has asked the China Securities Regulatory Commission for permission to offer shares as much as 15 per cent below the Shanghai price, the people said, asking not to be identified as the information is private.

Regulators typically require companies to sell stock overseas at no more than a 10 per cent discount to their local price.

The company and its bankers concluded after meetings with potential investors in Hong Kong that a bigger discount was needed to lure buyers, one of the people said.

The slowdown in the mainland's economic growth and Europe's debt crisis have weakened demand for new shares in Hong Kong, and first-time offerings in the city are on track for their slowest year since 2003.

A Hong Kong-based spokeswoman for Zhengzhou Coal declined to comment on the share sale plan.

Companies have raised US$5.7 billion from first-time offerings in the city this year, the least for similar periods since 2003, according to Bloomberg data.

Zhengzhou Coal may postpone its share sale to November or December as it awaits regulators' approval, the people said.

The company had planned to start trading in Hong Kong early next month, people with knowledge of the matter said last week.

Zhengzhou Coal, based in Zhengzhou city in Henan province in central China, is already listed in Shanghai.

It's price share has fallen 17.8 per cent this year in Shanghai, valuing it at 14.3 billion yuan (HK$17.6 billion).

The Hong Kong offering may account for about 20 per cent of the company's increased capital, the people said.

The benchmark Shanghai Composite Index has lost 6.5 per cent this year and fell below 2,000 on Wednesday, a level last seen in early 2009, as Chinese industrial companies' profits dropped for a fifth month last month.

The index jumped the most in three weeks yesterday on speculation the government will announce measures to bolster the stock market.

Deutsche Bank, JP Morgan Chase and UBS are managing the offering for Zhengzhou Coal, the people said.

China is the world's largest coal-mining nation. Output grew 7.3 per cent year on year in the first seven months of this year.