Langham Hospitality Investment, an investment trust being spun off by Great Eagle, will set its unit price in the middle of the indicated range to attract investors, analysts say.
The trust, which embraces three hotels in Hong Kong, could raise HK$4.26 billion for Great Eagle in an offer of 852.2 million share-stapled units at HK$5, people familiar with the deal said.
The offering was marketed in a range of HK$4.65 to HK$5.36.
Adrian Ngan Wai-hung at Citic Securities, said that by pricing the units in the middle of the range, it left room for the price to rise on the first day of trading and buyers to sell again at a profit.
If Great Eagle waives distribution of the dividend to itself in the first year, the yield could be close to 6 per cent a year, he said, but such a high yield might not last.
Great Eagle forecast distributions per unit of 18 HK cents by the end of the year.
Li Kwok-suen, a fund manager at Phillip Capital Management, said pricing in the mid-range was likely to be because of the day's sharp drop in the stock market.
Hong Kong stocks fell yesterday, the benchmark Hang Seng Index sliding 591.4 points, or 2.54 per cent, to 22,669.68.
"Institutional investors might pull back their orders if the offer is priced at the top end at a time when market sentiment is turning sour," Li said.
"It would be a smart strategy to set it at a lower level."
The units will list next Thursday. Great Eagle will control and own at least 51 per cent of the trust manager after the spin-off.
The trust comprises the Langham, Langham Place and Eaton hotels in Kowloon, totalling 1,629 bedrooms. Based on a valuation by the company, each room is worth about HK$10.89 million.