Privately owned aluminum firm seeks $900m IPO

By Fox Hu (China Daily/Agencies)
Updated: 2011-03-12 10:22
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HONG KONG - China Hongqiao Group Ltd, the country's largest privately owned aluminum producer, is seeking to raise about $900 million in a renewed bid to sell shares in Hong Kong, according to two people with knowledge of the matter.

The stock for sale in the initial public offering (IPO) represents about 15 percent of the company, said the people, who declined to be identified before an announcement.

The IPO will follow those of United Co Rusal and Aluminum Corp of China Ltd in tapping Hong Kong investors keen to buy into rising demand. IPOs in the city may raise as much as HK$350 billion ($45 billion) this year, according to PricewaterhouseCoopers LLP.

"Aluminum has a very positive outlook this year, better than 2010 and 2009," Owen Liang, an analyst with Guotai Junan Securities Co, said from Shenzhen on Friday. As the price differential between aluminum and copper grows, substitution can be expected, Liang said.

The Shandong-based company that produces molten aluminum will start taking orders from investors on March 14 and will price its shares on March 18, the people said. JPMorgan Chase & Co, Barclays Capital Plc, BNP Paribas SA, BOCOM International Ltd and ICBC International Holdings are managing the transaction, they said.

In January, the company scrapped a plan to raise as much as $2.2 billion from a Hong Kong offering, citing "deterioration in market conditions", according to a Jan 31 filing to the city's stock exchange.

Hongqiao has an advantage in production costs, as the company has its own power plant, Liang said.

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Aluminum may climb as high as $2,800 a ton as a shortfall drains Shanghai Futures Exchange stockpiles, Macquarie Bank Ltd said on March 7. This represents an increase of about 9 percent from its current price.

Aluminum demand in China is set to exceed supply by 700,000 tons over 2011's first half, Macquarie said. That would eat into inventories tracked by the Shanghai exchange, provided the State Reserve Bureau refrained from selling metal into the market.

Hongqiao, whose customers make window frames, doors and speed-train components, said in its earlier prospectus that it planned to use the capital raised to double capacity by 2012.

Some 1.74 billion shares, or about 25 percent of the company, were originally offered at HK$7.10 to HK$9.90 apiece, according to a sale document sent to investors on Jan 24.

Marie Cheung, a JPMorgan spokeswoman in Hong Kong and Allister Fowler, a Hong Kong-based spokesman for Barclays Capital, declined to comment.

Bloomberg News