MAOYE International Holdings Ltd is seeking as much as HK$7.06 billion (US$905 million) selling shares, said two people familiar with the sale, in a record Hong Kong initial public offering by a Chinese department store chain.
The Shenzhen-based company is offering investors 1.25 billion new shares, a 25 percent stake, at HK$4.35 to HK$5.65 each, said the people, who declined to be identified before an official statement. The range of the offering values Maoye at as much as HK$28.25 billion, according to Bloomberg News based on the information given.
Maoye is testing investor appetite for new stock offerings in a market unsettled by losses related to US mortgage lending to people with poor credit. Department store sales in China, the world's fastest growing major economy, may surpass US$100 billion in four years, according to Euromonitor International.
A struggle
"Unless it's in the right sector and priced cheaply, IPOs are going to struggle in an environment like this with concerns over inflation, the credit crunch, US economy and China austerity measures," said Andrew Clarke, a sales trader at SG Securities Hong Kong Ltd.
Hong Kong's Hang Seng Index fell 1.3 percent last Friday, after the New York Times reported Merrill Lynch & Co, the world's largest brokerage, was expected to post US$15 billion of subprime-related investment losses when it announces earnings this week.
About 56 percent of 82 companies that went public in Hong Kong last year by selling new shares traded below their offer prices by last Friday, according to data compiled by Bloomberg. Bloomberg doesn't track Hong Kong IPO data prior to 1999.
Goldman Sachs Group Inc is managing Maoye's share sale. Wang Huaying, a Shenzhen-based spokeswoman for Maoye, and Connie Ling, a Goldman Sachs spokeswoman in Hong Kong, declined to comment.
Maoye, already one of the largest department store chains in southern and southwestern China, is expanding the number of stores by 11, or nearly 80 percent, in the next three to five years as part of its ambition to establish a national network, the share sale document said.