PAUL Y-ITC Construction Holdings is planning to raise $380.5 million through a public share offer. Under the offer the construction contractor is issuing 190.25 million shares at $2 each, with one warrant for every five shares. The company comprises the entire construction division of International Tak Cheung Holdings (ITC), which will hold 40.1 per cent of the floated company and will act as an investment holding company, mainly in property. The net proceeds of the issue, amounting to $363.2 million, will be used to pay down debt. The repayments amount to 57 per cent of the total. Some $6 million will be used to buy plant and machinery, $55 million will form working capital on existing contracts and $93.9 million will be additional working capital. Cheung Kong (Holdings) will maintain a holding of about 20 per cent of the enlarged issue share capital after the float. ''It's our intention to retain that shareholding on a long-term basis,'' said Cheung Kong deputy chairman George Magnus yesterday. Kader Investment Co will own 9.9 per cent of Paul Y-ITC after the float, while Pacific Concord Holdings and Tem Fat Hing Fung (Holdings) will hold 2.5 per cent each. The funds raised will represent 25 per cent of the enlarged issued share capital of $1.52 billion. The new shares are being offered on a prospective price-earnings multiple of 8.46 times fully diluted earnings. Directors forecast that the combined profit of the group after tax but before extraordinary items for the year to March 31 will not be less than $180 million. Final dividend per share is estimated at 11 cents and earnings per share at 26.67 cents on a weighted average basis to give a prospective price-earnings multiple of 7.5 times. Fully diluted earnings per shares are estimated at 23.65 cents, giving a prospective price-earnings multiple of 8.46 times. The offer opens today and closes on Friday. Trading will start on September 21. Of the net proceeds, $40 million will be used to reduce bank borrowings and $168.3 million to repay the bank loan raised to replace the amounts due to the group. The issue is sponsored and managed by Seapower Corporate Finance. Seapower International Holdings managing director Francis Yuen Tin-fan said the placements arranged before the offer were aimed at creating a majority shareholder to take responsibility after the listing. He said the resulting enlarged shareholder base also helped the group become a leading construction company in the region. Kader and Pacific Concord had property projects in China, while Tem Fat Hing Fung had developments in Malaysia, he said. In the last fiscal year, Paul Y-ITC recorded a turnover of about $1.21 billion, with profit attributable to shareholders at $73.85 million. That contributed the lion's share of parent ITC's turnover of $1.65 billion and net profit of $88.11 million. Observers were concerned it did not make sense for ITC to hive off its major money-spinner. ''Things have changed a lot now. In the current financial year, we expect that Paul Y-ITC may not contribute as much as half the profit of ITC,'' said Paul Y-ITC chairman Charles Chan Kwok-keung. That was because ITC was starting to engage in property development both in Hong Kong and China. he said. The construction group has total contracts on hand worth $7.8 billion, of which about $787 million are from Cheung Kong and $2.7 billion from Hutchison Whampoa. China accounts for about 20 per cent of the group's contracts.
