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Warburg Pincus-backed ESR relaunches larger Hong Kong IPO

By Reuters

  • 21 Oct 2019
Warburg Pincus-backed ESR relaunches larger Hong Kong IPO
Credit: Thinkstock

ESR Cayman Ltd, backed by private-equity firm Warburg Pincus, relaunched a bigger Hong Kong initial public offering (IPO) that aims to raise as much as $1.45 billion, according to a term sheet seen by Reuters.

The relaunch of what would be Hong Kong's second-biggest IPO this year, after the float of AB InBev's Asia-Pacific unit , comes as companies forge ahead with listing plans in Asia's top financial hub following a months-long freeze during frequently violent anti-government protests.

ESR, which manages a range of property-focused funds and its own property investments, started book-building on Monday.

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It is selling about 654 million shares with a split of 42.9% primary shares and 57.1% secondary, totalling 21.5% of its enlarged share capital, at an indicative range of HK$16.2 to HK$17.4 ($2.07-$2.22), the term sheet showed.

Based on that range, the firm could raise $1.35 billion to $1.45 billion before any over-allocation option is included, giving it a market capitalisation of $6.27-$6.74 billion after the float, according to the term sheet.

The IPO has an offer size adjustment option allowing to sell more secondary shares, equalling up to 15% of the base deal. ESR can also exercise a 15% "greenshoe", or over-allotment, option if there is demand.

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ESR had planned to raise up to $1.24 billion in its earlier IPO attempt in June, but postponed the deal citing "current market conditions".

Sources, however, told Reuters that ESR had targeted a relatively aggressive valuation of between $6.28 billion and $6.75 billion, making the deal a hard sell at the time.

ESR declined to comment.

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At least seven existing shareholders are selling shares in the IPO, including Warburg Pincus unit WP OCIM, Goldman Sachs Investments Holdings (Asia) Ltd and e-commerce firm JD.com Inc's Jingdong Logistics Group Corp, the term sheet showed.

ESR has lined up $585 million from one cornerstone investor, OMERS Administration Corporation, among Canada's largest pension funds, based on the mid-point of the price range. It had not secured any cornerstone investors in its June IPO attempt.

CLSA and Deutsche Bank are joint sponsors for the IPO.

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ESR was formed in 2016 by the merger of the Japan-centric Redwood Group and China-focused e-Shang, co-founded by Warburg Pincus in 2011.

Its shares will be priced on Oct. 25 and trading is scheduled to start on Nov. 1.

ESR's float will be among a clutch of recent listings seen as tests of investor sentiment in Hong Kong that has been roiled by a five-month-long political crisis.

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Having topped the global charts in 2018 for funds raised through IPOs, Hong Kong is currently lagging behind both the New York Stock Exchange and Nasdaq with $18.5 billion raised as of mid-October, Refinitiv data showed. That compared with $21.9 billion on the NYSE and $23.3 billion on Nasdaq.

But IPO activity in the city has picked up, marked by the September relaunch by AB InBev's Asia-Pacific unit.

Budweiser Brewing Company APAC Ltd raised about $5 billion in Hong Kong's biggest and the world's second-largest IPO so far this year.

It had cancelled a plan for a bigger float in July citing "several factors, including the prevailing market conditions".

Among other planned listings, JS Global Lifestyle Company Ltd, on Monday launched a Hong Kong IPO of up to $464 million, according to a marketing term sheet seen by Reuters.

Backed by Chinese private-equity firm CDH Investments, JS Global is selling about 500 million shares with an indicative price band of HK$5.55 to HK$7.25 per share.

JS Global did not respond to a request for comment.

The company owns Chinese kitchen appliances maker Joyoung and US home appliances maker SharkNijia.

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