Chinese aluminium producer plans $US2bn raising to boost production

CHINA Hongqiao, a Chinese aluminium producer, plans to raise as much as $US2.2 billion ($2.2bn) in an IPO ahead of its Hong Kong listing.

Hongqiao, which is located in Shandong province and mainly produces molten aluminium alloy, plans to sell 1.74bn shares on February 11 at an indicative price range of $HK7.10 to $HK9.90, a person familiar with the situation said.

There is a greenshoe option to increase the offering size 15 per cent in the event of strong demand, which would boost the deal up to $US2.5bn. Institutional bookbuilding will begin Monday.

Hongqiao officials couldn't be reached for comment.

The company will use the proceeds to expand production capacity, the person said.

JPMorgan Chase, ICBC International, Bocom International and BNP Paribas are joint bookrunners for the IPO, another person familiar with the situation said.

The deal would be one of the largest IPOs in Hong Kong this quarter after the city topped global markets with a total of $US57.7bn raised from 87 listings last year.

Hongqiao joins a spate of companies seeking to tap the market in the next few months. Other Chinese companies lining up to list include hypermarket operator Sun Holdings Greater China, which plans to raise at least $US1bn; shipbuilder New Century Shipbuilding., which aims to raise as much as $US800 million; curtain-wall maker Shenyang Yuanda Aluminium Industry Engineering and marble miner Kingstone Marble, which each seek as much as $US500m, people familiar with the situations have said.

Hongqiao's IPO range translates to a multiple of 7.5 to 10.47 times the expected 2011 earnings, based on bankers' forecasts, the person said. By comparison, Hong Kong-listed United Co. Rusal of Russia, the world's biggest aluminium producer by output, recently traded at multiple of 6.5 and Aluminium Corp of China, also known as Chinalco, traded at 11.9, according to a Deutsche Bank research report on December 22.

Hongqiao's revenue increased 71 per cent in the first nine months of last year to 10.5bn yuan ($1.6bn) from a year earlier, while its volume of aluminium-products sales rose 38 per cent, amid a recovery in global demand for aluminium and the rise of aluminium prices from a market-low in 2009, according to a research report from one of the bookrunners.

The average selling price of Hongqiao's aluminium products increased by 17 per cent to 13,430 yuan a ton for the first nine months last year, the report said.

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