The head of China's largest home appliance retail chain, Gome Appliance, plans to sell down his stake in main board-listed China Eagle Group, in a move that could yield as much as $3.75 billion in cash. Wong Kwong Yu, the controlling shareholder of both companies, is selling 575 million consolidated China Eagle shares at an indicative range of between $4.85 and $6.53 each. As China Eagle plans to acquire a 65 per cent stake in Gome, the placement is being marketed as an initial public offering for the appliance retailer. The placement price translates into a forward price-to-earnings ratio (PE) of between 18.5 and 25, and will raise between $2.79 billion and $3.75 billion, according to fund managers who attended China Eagle's road show. By comparison, 11 listed electrical retailers in developed markets such as Britain, the United States and Japan trade at an average forward PE of 19.5. Mr Wong, who owns 66.9 per cent of China Eagle, has appointed ABN Amro Rothschild as sole global co-ordinator and book-runner. The sponsor is conducting an IPO road show touring from Hong Kong to New York. The offering will close on July 28, the date when China Eagle's shareholders meet to vote on the proposed acquisition of the Gome stake from Mr Wong, who would receive $243.5 million worth of new China Eagle shares plus two tranches of convertible notes worth $8.06 billion. Mr Wong's interest in China Eagle would increase to 97.2 per cent upon completion of the deal and full conversion of the notes. Hong Kong stock exchange rules mandate a minimum public float of 25 per cent. The China Eagle shares that Mr Wong is selling amount to about 35 per cent of the company. This will reduce his equity interest to 62.2 per cent, leaving the firm within the public float requirement. The deal is effectively a backdoor listing. But as Mr Wong raised his stake in China Eagle to 66.5 per cent from 41 per cent in February this year, qualifying him as a controlling shareholder, he skirts the ban on back-door listings implemented by the stock exchange on April 1.