Alibaba, Tencent, Baidu to hold big stakes in Foxconn unit after US$4.3 billion IPO

Foxconn Industrial Internet to use funds from China’s biggest domestic share offering in three years to develop smart manufacturing, cloud computing and 5G technology

PUBLISHED : Monday, 28 May, 2018, 8:00am
UPDATED : Monday, 28 May, 2018, 8:00am

Alibaba, Tencent and Baidu, mainland China’s three biggest internet conglomerates, will become major shareholders in Foxconn Industrial Internet after the technology firm’s upcoming US$4.3 billion initial public offering, China’s biggest domestic listing in three years.

The three received 21.78 million shares each in the maker of cloud computing technologies and industrial robots, joining three state-owned investment firms in taking big stakes, according to a statement by FII on Sunday.

A total of 20 strategic investors were allotted a total of 590.8 million shares, about 30 per cent of the total offering size, the statement said. The allotments to Alibaba, Tencent and Baidu are worth 300 million yuan (US$47 million) each based on the IPO price of 13.77 yuan, and have a lock-in period of three years.

Beijing has been actively encouraging big companies in new economy sectors to list at home, having watched as a number of high-profile ones have chosen New York and other exchanges. FII’s IPO received regulatory approval in just one month, in stark contrast to the usual one to two year wait for most companies in the mainland market.

FII, a subsidiary of the world’s largest contract electronics manufacturer Foxconn Technology Group, aims to issue 1.97 billion A shares, or 10 per cent of its enlarged capital. It plans to use the proceeds to finance 20 investment projects in eight areas, including the industrial internet, cloud computing, data centres, 5G wireless and smart manufacturing technologies, according to its prospectus.

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It would be the most valuable listing in mainland China since financial services firm Guotai Junan’s US$4.8 billion flotation in June 2015. The date of the listing has yet to be set.

The biggest allocation in the IPO – 72.549 million shares worth 1 billion yuan – went to Shanghai SDIC Joint Development Private Equity Fund, which is managed by the State Development and Investment Corporation, China’s largest state-owned investment holding company. Of its allotment, 50 per cent cannot be sold within 12 months, while the rest has a lock-in period of 18 months.

The second- and third-largest investors are state investment fund Central Huijin Investment, with 58.097 million shares, followed by China Railway Investment Company, the investment arm of China Railway Corporation, with 43.572 million shares.

Among others, China Life Insurance has been allotted 34.094 million shares.

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FII said in its statement that 590.8 million shares, or 30 per cent of the total offering, have been allocated to strategic investors. The rest is for sale to the public and other institutional investors through both online and offline channels.

In the online public tranche, investor demand has outstripped supply by more than 710 times, the company said in an earlier statement on Friday.