China Pacific Insurance, part owned by the Carlyle Group, confirmed on Friday it would relaunch a Hong Kong initial public offering which would be the world's third-largest IPO so far this year.
The plan to relaunch the IPO, confirming a Reuters report on Wednesday, follows China Pacific's failure to float its shares in Hong Kong last year when capital markets plunged amid the global financial crisis. The company is already listed in Shanghai.
In a statement released on Friday, the country's third-largest life insurer said it would offer up to 1 billion shares in Hong Kong at no less than the average price of its Shanghai-listed A shares in the previous 20 trading days.
Based on those figures, China Pacific could raise around 24 billion yuan, ($3.5 billion) if successful. It tried to raise more than $4 billion last year in Hong Kong.
Shanghai-listed shares of China Pacific closed at 27.88 yuan a piece on Thursday and rose nearly 3 percent to 28.7 yuan on the news about its IPO plan by Friday's midday break.
The offering would rank behind Brazil's VisaNet's $3.66 billion IPO and world's biggest IPO, by China State Construction Engineering Corp for as much as $6 billion.
Sources on Wednesday told Reuters that board members, including Carlyle representatives, were expected to approve the new IPO plan soon.
Washington D.C.-based Carlyle CYL.UL became China Pacific's first foreign investor in late 2005 and now the U.S. private equity giant holds around 17 percent of the Chinese insurer.
China Pacific's Hong Kong IPO is expected to attract interest due to growing global interest in Chinese equities, analysts say.
CHEAPER THAN SHANGHAI
China Pacific's Friday's statement did not elaborate on its IPO plan but sources told Reuters the new plan would exclude a minimum listing price condition that had been previously required and was a key factor in the delay of its previous offering.
China Pacific had pledged not to list shares in Hong Kong at a value below its December 2007 Shanghai IPO of 30 yuan per share, priced during the market's bull run.
China Pacific will surely be priced lower in Hong Kong as Hong Kong's H-shares nearly all trade below Shanghai's A shares now, including its rivals China Life and Ping An, said Wang Xiaogang, an insurance analyst of Orient Securities in Shanghai.
Shanghai-listed A shares of dual-listed Chinese firms often enjoy huge premiums over their Hong Kong-listed counterparts, partly due to a lack of investment channels in mainland China.
Based on China Pacific's average A-share closing prices over the past 20 days, its H-shares are expected to be priced at an equivalent of around 23.5 yuan (HK$26.7), or at about a 20 percent discount to its A shares, Wang estimated.
China Life (601628.SS)(2628.HK), and Ping An (601318.SS) (2318.HK), part owned by HSBC Holdings Plc (HSBA.L) (0005.HK) currently hold much bigger domestic market share than China Pacific, which said it would use part of its Hong Kong IPO proceeds to expand business.
China Pacific's new Hong Kong IPO plan is still subject to approval at its shareholders' meeting scheduled on August 31, it said in Friday's statement.
The IPO would be held within 12 months of obtaining approval from the company's shareholders, it said.
Carlyle is unlikely to sell its entire stake but may offload a small portion after the IPO as it remains keen to make its deal with China Pacific a showcase for its investment success in Asia, sources have said.
Friday's statement didn't name any IPO sponsors and sources have said no formal appointments have been made yet.
(Additional reporting by Alfred Cang and Karen Yeung in Shanghai; Editing by Valerie Lee)