Poly Culture plans global growth with Hong Kong IPO targeting HK$2.57b

PUBLISHED : Monday, 24 February, 2014, 4:27am
UPDATED : Monday, 24 February, 2014, 4:27am

Poly Culture, the culture and auction business unit of state-owned military-linked conglomerate Poly Group, plans to expand its international business after an initial public offering in Hong Kong this week that is expected to raise up to HK$2.57 billion.

"We are very big in the art auction market in mainland China but still have a long way to go to become the biggest auction house worldwide," chief executive Jiang Yingchun said at the company's listing briefing yesterday.

"We hope the Hong Kong IPO will boost our international brand. Half of the funds raised in the IPO will be used to expand our global art client network in major countries, with the rest to expand our cinema and performance businesses."

Beijing-headquartered Poly Culture, the first mainland auction house to list overseas, is selling up to 77.78 million shares in an indicative price range of HK$28.20 to HK$33 per share from today until Thursday. Ten per cent of the shares will be sold to Hong Kong investors and the rest abroad.

The share price will be fixed on Friday, and trading is scheduled to start on March 6.

Poly Culture conducts auctions of art and is involved in theatre management and cinemas.

The firm is known for spending HK$31.4 million in 2000 to buy the sculptured bronze heads of a monkey, ox and tiger in two auctions. The sculptures are national treasures looted from the Summer Palace in Beijing in 1860 by Anglo-French forces.

Its parent company, Poly Group, which will own 67 per cent of the company after the share sale, was founded in the early 1980s by the People's Liberation Army and others to engage in arms exports, real estate, mining and other businesses.

A risk factor listed in the prospectus was that US government sanctions imposed on Poly Technologies (Poly Tech), part of Poly Group, from February last year might hurt Poly Culture's reputation.

The US alleged Poly Tech had breached a law aimed at restricting the development of weapons of mass destruction by Iran, North Korea or Syria. Poly rejects the allegation.

Poly Culture said the sanctions would not hurt its operations because it had no business links with the US government nor Poly Tech.

Ben Kwong Man-bun, the chief operating officer at KGI Asia, said the initial public offering would be popular, as Poly Culture was a well-known company conducting a unique business.

"However, investors would need to beware of the risk of swings in the arts auction business with the economic cycle. In addition, it will find it hard to compete with long-established international auction houses such as Christie's and Sotheby's," Kwong said.