Home Inn Hotels looks to Nasdaq for US$80m
Jamil Anderlini in Beijing
China's second-largest budget lodging chain wants to list as soon as possible
Home Inn Hotels & Management, China's second-largest budget hotel chain, plans to raise up to US$80 million in an initial public offering in the United States, the company said yesterday.
The company plans to sell American depositary receipts on the Nasdaq market through its holding company registered in the Cayman Islands 'as soon as practicable', according to documents filed with the US Securities and Exchange Commission.
About US$45 million of the money raised will be used to expand the hotel chain and existing properties while US$7.5 million will be used to repay debts.
Home Inn has 82 hotels in 26 cities in the mainland with a further 57 under development which will expand its reach to 40 cities. The company did not say what price it expected to sell the shares.
'I have no idea and can't comment on the expected listing price,' said Neil Shen, Home Inn's co-founder and co-chairman.
Mr Shen was co-founder, president and chief financial officer of Ctrip.com International, China's largest online travel company, as well as a founding managing partner of Sequoia Capital China, which was established last year as a subsidiary of top Silicon Valley venture capital firm Sequoia Capital.
Home Inn was established in 2002 as a joint venture between Ctrip and Beijing Tourism Group, a wholly owned subsidiary of the Beijing government, and was spun off by Ctrip before its IPO.
Beijing Tourism still owns 24.4 per cent of the chain while 'the founders own 32.5 per cent between them and are the largest shareholder as a group,' according to Mr Shen.
The share sale has not been approved by the China Securities Regulatory Commission as might be required under new merger and acquisition legislation that came into effect on September 8.
The company said it believes such approval is not necessary because it was established by direct investment, rather than through a merger or acquisition.
Merrill Lynch, Credit Suisse and Deutsche Bank are underwriting the sale.
The company said it has been profitable since 2003 and that net income grew from 1.5 million yuan that year to 20.9 million yuan last year.
In the first half of this year, the company had net income of 27.2 million yuan on revenue of 249.1 million yuan.
Three venture capital funds, Asiastar IT Fund, IDG Technology Venture Investments and Susquehanna China Investments, own 22.5 per cent, 13.5 per cent and 5.3 per cent, respectively.
Asiastar and IDG each plan to sell about 30 per cent of their shares in the IPO.
According to a survey by the Ministry of Commerce and the China Hotel Association, Home Inn is the No2 budget hotel chain in the country, with 18 per cent of the market last year. The number one was state-owned Jinjiang Star, with 20 per cent.
Domestic travel spending in China increased from 352.2 billion yuan in 2001 to 528.6 billion yuan last year, an annual growth rate of about 10.7 per cent, according to government figures.
Home sweet inn
Expansion of hotels and existing properties requires US$45m
Home Inn plans 139-hotel chain covering 40 mainland cities
Earnings up from 1.5m yuan in 2003 to 20.9m yuan last year