China's largest car rental firm unveils Hong Kong listing
China Auto Rental plans to raise up to HK$3.62 billion in public offering
China Auto Rental, the mainland's largest car rental firm, launched an initial public offering in Hong Kong yesterday that is expected to raise up to HK$3.62 billion, betting car ownership restrictions and higher spending on travel in the world's second-largest economy will fuel demand for hire vehicles.
The company, backed by private equity firm Warburg Pincus and Hertz Global, is offering 426 million new shares, a source said, citing details from a term sheet.
The shares are being offered in an indicative range of HK$7.50 to HK$8.50 each, putting the total deal at HK$3.62 billion, the source said. The IPO is set to be priced on September 11, with shares starting to trade on the stock exchange on September 19.
The mainland's car rental market is forecast to surge to 65 billion yuan (HK$82 billion) by 2018 from 34 billion yuan last year, the company said in its draft IPO prospectus, citing estimates from industry consultancy Roland Berger.
Long-term rentals of more than 90 days, which are mostly used by corporate customers unwilling to own their own fleet, account for about 60 per cent of the market but are expanding at a slower pace than short-term rentals.
The mainland's market for short-term self-drive car rentals was expected to grow at an average of 27 per cent a year from 2013 to 2018, more than double the 13 per cent growth in Brazil and far outpacing the 6 per cent expansion in the United States and 2 per cent in Japan, the company said.
Long-term rentals were forecast to grow 11 per cent a year in the same period.
China Auto Rental plans to use 70 per cent of the offer proceeds to expand its fleet. It will buy 45,000 to 60,000 vehicles, adding to the 55,000 cars it had at the end of March, according to its draft prospectus.
It said 20 per cent of the funds would be used to pay down loans and 10 per cent would be set aside for working capital.
The company received commitments worth US$160 million from six cornerstone investors, including US$30 million each from US fund manager Waddell & Reed Financial, Hillhouse Capital Management, hedge fund Falcon Edge and Hertz. Davis Selected Advisers and China Chengtong agreed to invest US$20 million each.
The investment pledges should help it secure demand for the offer after China Auto Rental cancelled a US$138 million US offering in 2012, citing poor market conditions.
Credit Suisse and Morgan Stanley were hired as joint sponsors, with China International Capital Corp acting as a joint global coordinator.