Chinese surgical instruments firm Kangji Medical to raise up to US$404 million in Hong Kong IPO, names Hillhouse Capital, BlackRock among cornerstone investors
- Cornerstone investors take up combined US$165 million of Zhejiang province-based surgical instrument maker’s international placement tranche
- With just four health care IPOs this year, Hong Kong faces fierce competition from Shanghai exchange
Kangji Medical, a mainland Chinese provider of minimally invasive surgical instruments, is raising up to US$404 million in an initial public offering before a listing on the Hong Kong bourse, joining several other health care and biotechnology Chinese start-ups that are preparing to tap investor funding this summer.
Cornerstone investors Hillhouse Capital, BlackRock, FMR, Cormorant Asset management, OrbiMed Capital, Lake Bleu Capital and Oaktree Capital have taken up a combined US$165 million of the listing’s international placement tranche.
Kangji has set the indicative price range at HK$12.36 (US$1.6) to HK$13.88 a share, valuing the company at a price-to-earnings multiple of 26.2 times to 29.4 times based on its 2021 expected earnings. The offer shares represent about 18 per cent of the company’s enlarged issued share capital, according to the deal’s term sheet.
The Hong Kong offering will start on Tuesday and last until Friday, June 19, when the final pricing will be determined. Listing on the main board is scheduled for June 29. Bank of America, Citic Securities and Goldman Sachs are joint sponsors of the deal.
With just four health care IPOs completed this year to date raising US$1.25 billion for the sector, Hong Kong faces fierce competition from the Shanghai Stock Exchange, which has completed 13 health care IPOs raising a combined US$1.69 billion.
Chinese cancer drug firm Akesobio’s US$330 million IPO is oversubscribed 639 times by city’s investors
US private-equity manager TPG, an existing shareholder, will sell 33.81 million of its shares in Kangji as part of an overallotment option, if the IPO raises strong investor demand. TPG invested in the Zhejiang province-based company in December 2017, at a price of 76.84 yuan a share, or about 1.44 billion yuan, for a 25 per cent stake, according to a preliminary prospectus filed with the Hong Kong stock exchange.
Its cornerstone investor line-up points to potentially strong demand from other institutional investors, which could subscribe up to 90 per cent of the total new shares on offer, according to the term sheet. Assuming the deal was priced at the low-end of the price range, their combined subscription would account for as much as 45 per cent of the IPO deal value.
Increasingly, apart from dedicated health care investment funds, traditional asset managers are also investing in health care deals as cornerstone investors. These investors want to subscribe to deals early to ensure that they get a share of the stocks on offer, said a banking source who requested anonymity.
Shanghai overtakes Hong Kong as world’s top IPO destination
For the full year of 2019, Kangji’s net profit totalled 326.74 million yuan, up 46 per cent from 223.79 million yuan a year ago. It plans to use the net proceeds raised on expanding production capabilities, research and development, and for funding potential acquisitions and strategic investments.
Kangji is not the only biotechnology and health care related issuer seeking to raise funds from a listing in Hong Kong. Shanghai-based radiotherapy service provider Hygeia Healthcare is targeting US$300 million to US$400 million from an IPO in the city this month at the earliest. Immunotech Biopharm, an immunotherapy biopharmaceutical company, is also preparing an IPO after passing the Hong Kong stock exchange’s listing hearing.
