Sany Heavy to raise $3.33b in HK offer

Updated: 2011-09-19 14:51


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HONG KONG - Sany Heavy Industry, China's largest construction machinery maker, aims to raise up to $3.33 billion in what could be Hong Kong's No 2 stock offering this year, as it braves volatile markets to garner funds for expansion of its factories.

Sany Heavy's offering comes on the heels of a slew of deals that hit Hong Kong's equity market last week after nearly two straight months of drought in share sales as investors shunned turbulent global markets.

The company, run by China's richest man, is offering 1.34 billion shares for HK$16.13-HK$19.38 each, putting the total offer value at up to HK$25.97 billion ($3.33 billion), according to a term sheet seen by Reuters on Sept 19.

The sale would be the biggest since commodities trader Glencore raised nearly $10 billion in a dual listing in Hong Kong and London and would top a $2.5 billion initial public offering by luxury goods maker Prada in June.

"Selling H shares would help Sany build its international branding and would play an important role in accelerating its exports and international expansion," said Zou Runfang, analyst at China Galaxy Securities Co.

"However, the current market sentiment may hurt demand for its H- shares in the short term."

Sany, often referred to as China's Caterpillar, and rival XCMG Construction Machinery have benefited from China's construction boom over the past many years.

Sany's CEO and founder Liang Wengen is listed China's richest man by Forbes, with an estimated wealth of $9.3 billion.

The company's Shanghai-listed shares were down 0.5 percent in early trade.

Expansion plans

Citic Securities Co Ltd, China's largest publicly traded brokerage, began meeting investors on Sept 16 to market an up to $1.94 billion Hong Kong deal.

Offerings from Citic Securities and Sany Heavy could also open the way for other large deals in coming months.

Sinohydro, the builder of the Three Gorges Dam, said on Sept 19 it would launch a $2.7 billion initial public offering this week, confirming a Reuters report last week.

Chinese consumer companies, including Tea maker Tenfu Holdings Co Ltd and shoe retailer Hongguo International Holdings Ltd, recently launched $485 million worth of IPOs in Hong Kong.

Sany is offering a 16.6 percent discount to its A share reference point, more than the 13.3 percent discount offered by Citic, given the bigger size of the fund raising.

China's share of global sales of construction machinery has grown to 40 percent in 2010 from just 5 percent in 2005, driven by a 15 percent compounded annual growth in China's GDP between 2000 and 2010.

However, the company, which makes more than 500 models of construction machinery, faces challenges due to a slowdown in Chinese economy caused by weak global economic growth.

Sany plans to use nearly half of the proceeds to build new plants to expand capacity for excavators, crawlers and cranes.

Bank of America Merrill Lynch, Citic Securities and Citigroup Inc were tapped as joint global coordinators to manage the offering.

Sany Heavy, which has a market value of about $18 billion, plans to price the offer around Sept 26 and the shares are set to start trading in Hong Kong on or around Oct 3, the term sheet showed.