Direct B-share issue to establish precedent

Kenneth Ko

SHANGHAI Outer Gasqiao Free Trade Zone Development Company (Shanghai Gasqiao) is expected to launch its B-share issue through a simultaneous public offering in Hongkong next month.

The property developer will become the first mainland enterprise to sell B shares directly to foreign investors, rather than through international merchant banking institutions.

The unprecedented move is likely to give a psychological boost to China's B-share market and will set an example for other mainland companies.

Sources in Shanghai said the Registrar General's department in Hongkong and China's securities watchdog were putting the final touches on the public offering.

Senior executives of Shanghai Gasqiao, led by general manager Ruan Yanhua, are expected to visit Hongkong next month at the time of the planned offer.

The public offer had originally been set for this month, but the longer-than-expected vetting process by Hongkong and Chinese authorities had caused a short delay.

Concerns have centred on the standard of the accounting and reporting systems in China, which are different from international standards.

Shanghai Gasqiao's B-share issue is believed to be worth about 85 million yuan (about HK$115 million at official rates).

Shanghai Shenyin Securities and Wardley Corporate Finance, respectively the local and international sponsors of the issue, are working on the pricing of the offering.

The offer price of Shanghai Gaoqiao's B share is expected to be slightly higher than 28 yuan per share, the issue price of its A shares.

Both A and B shares of Shanghai Gasqiao will be listed on the Shanghai Securities Exchange.

Shanghai Gasqiao was formed and authorised by the Shanghai municipal government to undertake the development of the Outer Gaoqiao Free Trade Zone in Pudong. It has a registered capital of 630 million yuan.

The company has set up a joint venture with Shanghai Trust and Consulting Co, China Development Investment (Hongkong) and China Merchants Holdings.

The joint venture, with a registered capital of US$80 million, involves a total investment of US$200 million. The period of co-operation is 50 years.

The venture's business includes infrastructure construction, property development, storage, distribution and trading activities in the free trade zone.

The Outer Gasqiao Free Trade Zone will span 10 square kilometres.

The long-term goal is to make Outer Gasqiao, in the northeast part of Pudong, one of the largest free-trade zones in the Asia-Pacific.