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Gome Electrical Appliances Holding, the mainland's largest consumer electronics retailer, will list its newly issued convertible bonds in Singapore this month.

The company said it  would use the HK$6.55 billion in proceeds from selling the bonds and new shares to fund organic expansion.

Gome raised HK$1.46 billion via a placement of 110 million new shares at HK$13.30 each - a 5.67 per cent discount to the stock's last closing price of HK$14.10 and at the lower end of a HK$13.25 to HK$13.68 price range.

The shares represent 3.5 per cent of Gome's enlarged share capital.

Chairman Wong Kwong-yu's stake in Gome will fall to 49.4 per cent after the sale, from 51.2 per cent.

The firm also raised HK$5.09 billion from a seven-year, zero-coupon bond issue with a conversion price of HK$19.95. The yuan-denominated, US dollar-settled bonds will be convertible to 234.7 million shares, representing 8.1 per cent of the post-conversion share capital.

Gome chose to list the bonds following a request from subscribers, according to the  head of corporate finance Curt Lam. He said the retailer considered the Singapore stock exchange flexible and its bond market as more reputable than that of Hong Kong.

Gome will use 35 per cent of the funds raised, or HK$2.3 billion, to buy  store properties, open 100 standard retail outlets and 70 digital stores before the end of this year, and revamp its store layouts.

Twenty per cent of the proceeds, or HK$1.3 billion, will be used to open seven regional distribution centres. The remaining HK$2.94 billion will be used as general working capital and for upgrading its information technology systems.

The fund-raising deals come after Gome shares climbed 4.2 per cent on Friday. The rise brought its one-month gains to 51 per cent amid investor expectations that the company soon would receive assets from Mr Wong and list in the A-share market. Gome submitted its application to acquire stores owned by Mr Wong early this year, pending approval from the Ministry of Commerce.

Goldman Sachs is sole bookrunner for the share and bond sales, while  Lehman Brothers also assisted with the bond issue.

Shareholder Warburg Pincus also offered to sell 90 million Gome shares for up to US$159 million. Its stake in Gome will fall to 2.8 per cent from 5.78 per cent after the deal.

Gome last week said first-quarter underlying profit surged 232 per cent after it eked out growth in same-stores sales.  However,  net earnings per share slipped 6 per cent to 5.53 fen, based on the 3.06 billion shares outstanding at the end of March, from 5.88 fen a year earlier, when there were 1.64 billion shares.

Expansion plans

Company plans to fund growth via bond issue and share placement

The number of standard retail outlets Gome plans to open this year: 100



Gome seeks HK$6.5b to fund expansion