Waste incinerator maker ZhongDe Waste Technology AG could be the first Chinese company to float its shares solely on the German stock exchange, paving the way for other firms from China to follow.
ZhongDe, whose name stands for China and Germany, said in an interview it would float its German holding company by the end of the year, selling shares from a capital increase and from existing shareholders.
"We want to use this platform to build up our international reputation," Chief Executive Zefeng Chen, who owns 68 percent of the firm, said.
The company is aiming for a listing on Deutsche Boerse's Prime Standard segment, which is a prerequisite for inclusion in Germany's small-cap , mid-cap , technology or blue-chip indexes.
In March, Chinese wood-working machinery maker Gongyou Machines privately placed about 1.6 million shares on Boerse's junior Open Market segment.
ZhongDe said it chose Frankfurt because it was looking for a German business partner, adding that the market also had high levels of liquidity and transparency, while local investors were familiar with the industry and Frankfurt provided access to international markets.
"The Chinese will watch this closely to examine the Frankfurt market," an investment banker said. "This could have a signalling effect for other firms ... I could imagine that a handful of companies will follow suit in the next 12 months".
ZhongDe is a supplier of incinerators in China for medical and municipal waste from hospitals, communities and provinces. It has installed 170 incinerators since being founded in 1996, it said.
The firm would use the proceeds from the IPO for capacity expansion. A second production base in Beijing is due to open at the end of 2008.
In the medium term it also wants to enter southeast Asian, African and eastern European markets, it said.
In 2006, ZhongDe earned 11.9 million euros ($16.1 million) before interest and tax on sales of 19 million euros, with a net profit of 8 million euros.
Sal.Oppenheim will be the lead manager for the IPO.