Haitong Securities Co Ltd <600837.SS>, China's second-largest publicly traded brokerage, could raise about $1.7 billion (1.0 billion pound) with a listing in Hong Kong, two sources with direct knowledge of the deal said on Wednesday.
The company will offer 1.229 billion shares at an indicative range of HK$9.38 to HK$10.58 each, putting the total deal at up to HK$13 billion (1.07 billion pound), said the sources, who could not speak publicly on the matter.
Listed and based in Shanghai, Haitong Securities would follow larger rival Citic Securities <6030.HK> <600030.SS>, which raised $1.7 billion in Hong Kong late in September. It would also be competing for investors with a slew of other companies tapping capital markets in the final weeks of 2011 after a dismal second half.
Chow Tai Fook Jewellery Group Ltd <1929.HK> is looking to raise up to $2.83 billion, while New China Life could sell up to $2.3 billion of shares and luxury auto dealer Baoxin Auto Group Ltd. $580 million. PCCW's HKT Trust <6823.HK> last week tapped markets for $1.2 billion in its IPO.
Companies and their bankers are pitching deals to investors around the world despite ongoing volatility in global markets caused by Europe's debt woes and concerns over slower growth in China and the United States. Rising volatility has made it harder for companies to price deals and for investors to gauge whether to buy or remain on the sidelines.
Based on the current uncertain markets environment, for the short-term investors, it's better to wait to see if the macro environment becomes better, said Xingyu Chen, a banking analyst at Phillip Securities in Shanghai. This absolutely depends on the risk tolerance and the period investors want to invest.
Founded in 1988 as Shanghai Haitong Securities Company, the company has 210 branches in 113 cities in mainland China with 13 more in Hong Kong and Macau and more than 4 million retail brokerage customers.
Haitong Securities posted unaudited profits of 2.9 billion yuan ($453.1 million) in the first nine months of 2011, on revenue of 8.04 billion yuan, according to a filing with the Hong Kong stock exchange. It forecast profits of at least 3.14 billion yuan for all of 2011.
The bulk of the company's revenue comes from securities and futures brokerage fees, which account for 41 percent of the total, followed by its private equity business with 22 percent. Investment banking and asset management each account for about 10 percent of revenue and Haitong Securities' overseas business for nearly 9 percent.
Haitong, because it's based on domestic financial markets, compared with other sectors or other areas in global markets, now it's quite an attractive opportunity to invest, Chen said.
Haitong Securities said in the filing it recorded a net loss of 303.1 million yuan in the third quarter in its proprietary trading business because of monetary tightening and high inflation in China and worries about Europe's debt troubles that caused a surge in market volatility.
The losses compared to investment gains of 802.7 million yuan in the first half of 2011.
Private equity firm Warburg Pincus LLC
Such investors back many Asian listings, committing to buy large, guaranteed stakes and agreeing to a lock-up period during which they cannot sell their shares.
IFR, a Thomson Reuters publication, said the offering represented a price-to-book ratio of 1.17 to 1.32 times for 2012. Citic Securities priced its IPO in September at a ratio of 1.22 times.
(Editing by Chris Lewis and Matt Driskill)