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SCMP Reporter

US networking gear giant's HK$401m deal marks first equity sale in city since August
Cisco Systems, the world's largest supplier of networking equipment, sought  to offload half of its stake in China Communications Services Corp  (China Comservice) for HK$401 million through a secondary share offering yesterday,  sources  said.
The  transaction was set to be the first equity share placement since August in Hong Kong, whose equity market has been quiet  over the past three months  following the volatility triggered by the global financial turmoil.
Cisco is offering 90 million  China Comservice shares at an indicative price range of HK$4.27 to HK$4.50 each.
This represents a  discount of as much as 14.1 per cent to the  stock's closing price of HK$4.97 yesterday, according to a sales document obtained from fund managers.
Shares of China Comservice advanced 5.07 per cent.
Morgan Stanley was the sole arranger of the deal, but  it declined to comment on the transaction.
'The offering would draw strong interest from long-only funds as they are always bullish on the mainland telecommunications sector restructuring and the 3G licence issuance,' said an investor at a hedge fund.
The last sizeable share placement was also handled by Morgan Stanley,  when it helped the chairman and management of China Mengniu Dairy reap HK$1.2 billion in August through a share sale.
Asia has seen no equity activity,  including  initial public offerings, convertible bond issues or secondary share sales since  another US investment bank, Lehman Brothers Holdings, filed for  provisional liquidation in mid-September.
After the share sale, Cisco's stake will be reduced to 4.46 per cent from its original 8.96 per cent share in the company.
'I think the window of share offerings is short-lived,' said Ronald Wan, the managing director of China Merchant Securities (Hong Kong).
'Investors could tap the market for fresh capital  when the market sentiment is strong, but I doubt whether  current market conditions  would spur more share offerings in the near term.'
This year, Asian equity  deals registered their lowest volumes since 2003 and the  least number  since 1998, according to  Thomson Reuters data.
Cisco invested in China Comservice,  the nation's largest network equipment provider, when the firm went public in Hong Kong in 2006.
It had made a US$50 million commitment for the  offering  at HK$2.20 per share. It  acquired another batch of 73.9 million China Comservice shares at an average price of HK$5.25 per share in March this year.
Based on the indicative price range, Cisco could  see a 104.5 per cent return on  the shares it first acquired, or  suffer an 18.6 per cent loss  from the batch it bought in March.
Analysts  said China Comservice could be one of the winners in the mainland 3G market, as the three state-owned operators - China Telecom, China Unicom and China Mobile - will  embark on  a more than 200 billion yuan (HK$226.8 billion) capital expenditure  to build the network.



Cisco sells 50pc of China Comservice stake