|
|
| China Galaxy Securities $1.1 billion H-share IPO | |
| Joint global coordinators | Nomura, Goldman Sachs, JPM, Galaxy International, ABCI |
| return to the Deals of the Year 2013 index | |
Initial public offerings in Hong Kong during the first half of last year were something of a novelty.
So a $1.1 billion flotation that popped 11% on its opening day, regardless of its pricing, was something to sit up and take notice of.
At the time it came to market in May, China Galaxy Securities was the largest Asia FIG IPO of the year and the second-largest Hong Kong IPO. In successfully making its stock market debut it kicked off a revival in the Hong Kong IPO market, which has largely struggled to recapture former glories in recent years. China Galaxy’s flotation paved the way for a host of other banks to access the public markets. After its success, issuers including China Everbright, Bank Chongqing and Huishang Bank proceeded with their own deals, further building momentum for the market as a whole in the second half of the year.
At the time of its launch, many observers doubted that the company had got its timing right. It priced amid volatile markets. Indeed during the marketing period for China Galaxy, its two closest competitors, Citic Securities and Haitong Securities, fell by 4.4% and 6.4% respectively. And immediately before the pricing, the Hang Seng had posted one of its worst monthly falls – hardly the ideal conditions in which to test investor appetite.
Despite the volatile market sentiment, final pricing was at a tight 4.4% discount to Haitong Securities, demonstrating the syndicate’s ability to generate demand and deliver pricing well above the 14.2% discount at the bottom of the price range during the launch of bookbuilding.
The company raised $1.1 billion after pricing its debut at the low end of its indicative range of $4.99 to $6.77 a share. Demand from retail investors was almost 30 times the number of shares on offer, with the institutional tranche of the IPO also substantially oversubscribed.
China Galaxy is a young company, established at the start of 2007. The Beijing-based brokerage is controlled by China’s sovereign wealth fund. As a state-owned enterprise, its fortunes and strategy are closely watched in China and beyond.
The joint global coordinators on the deal were Nomura, Goldman Sachs, JPMorgan, Galaxy International and ABCI. In total, including the JGCs, 21 bookrunners worked on the China Galaxy deal. This large number of bookrunners was typical of many of the larger ECM deals last year. Saying that this was an issuer’s market would be an understatement. Increasingly in Hong Kong, one of the main roles expected of bookrunners, in particular JGCs, is to bring cornerstone investors to a deal, their presence amounting to a guarantee that a flotation can at least proceed. In the case of Galaxy, seven cornerstone investors backed the deal with a combined $360 million, just over a third of the whole offering size. The cornerstones for China Galaxy were AIA ($50 million), China Life ($30 million), Cinda Asset Management ($20 million), Genertec ($30 million), Khazanah ($100 million), Sino Life ($50 million) and Sinopec ($80 million) – a good mix of sovereign wealth funds and institutional and corporate investors from a diverse geography.
The use of large groups of bookrunners on IPOs in Hong Kong and elsewhere in Asia looks to be a development that is here to stay, at least while global market sentiment remains relatively fragile. On average, at least one Chinese bookrunner is now present on Hong Kong-listed IPOs. This has not been at the expense of non-Chinese bookrunners, numbers of which are also up. The average number of non-Chinese bookrunners for Hong Kong-listed IPOs reached 1.6 in 2013, up from 1.1 in 2012 and the highest average on record, according to Dealogic.
The average was boosted not only by China Galaxy’s 21 bookrunners, of which 11 were Chinese, but also the 19 bookrunners that worked on Huishang Bank’s $1.2 billion IPO in November. Of these, 13 were Chinese banks, the largest number on record for a Hong Kong-listed ECM deal.
With the boost provided by China Galaxy, Hong Kong-listed IPO volume reached $18.7 billion via 98 deals in 2013, over double the $8 billion priced in 2012. This was driven by Chinese issuers. Indeed 94% of IPO volume from Chinese issuers in 2013 listed in Hong Kong, the highest proportion on record
Finance led all sectors in 2013, raising $35 billion via 106 deals, approximately in line with 2012. Technology followed with $16.3 billion, up 71% on 2012. Real estate ranked third with $13.8 billion, up 33% year on year.
