ESR Cayman, an Asia-focused logistics company backed by Warburg Pincus, is looking to raise as much as $1.45bn in a revived Hong Kong initial public offering, in the latest example of a company opting to brave the political unrest that is rocking the Asia finance hub.
The company, which bills itself as Asia-Pacific’s biggest logistics real estate platform, will sell 653.7m shares to investors priced at between HK$16.20 and HK$17.40 ($2.07 and $2.22), according to a term sheet seen by the Financial Times. That range values the company at between $6.3bn and $6.7bn, and the deal includes a 15 per cent overallotment option known as a green shoe.
Even priced at the bottom end of the range, ESR would raise $1.35bn, making it Hong Kong’s second-largest IPO this year.
Hong Kong has struggled with weak investor sentiment towards the local stock market, as anti-government protests that started in June — over a law that could have seen criminal suspects extradited to mainland China — have broadened. The law has since been withdrawn.
Listings in the city have lagged behind those in New York this year, compared with 2018 when Hong Kong took the crown as the world’s top IPO venue. As of Monday, listings on Hong Kong’s main board totalled $18.4bn for the year to date, down 42 per cent and well behind $25.6bn for the New York Stock Exchange and $30.5bn for Nasdaq, according to data from Dealogic.
“Billion dollar-plus deals aren’t as common as they once were,” said Jason Elder, a partner at Hong Kong-based law firm Mayer Brown, referring to large Chinese financial and telecoms companies that once dominated listings in Hong Kong. “But there still are a number of other IPOs we believe will get done in 2019 and that reflects the maturity of the market and the growth of the mid-cap space.”
A mooted secondary listing of Alibaba shares in Hong Kong that could reportedly raise up to $20bn, as well as a float of its electronic payments affiliate Ant Financial, do not have a timetable.
There are tentative signs that sentiment in Hong Kong is improving. The Asia-Pacific unit of Anheuser-Busch, the world’s biggest brewer, raised $5.75bn in September after initially shelving its IPO plan. This month, Chinese sportswear retailer Topsports raised more than $1bn. ESR in June dropped plans for an IPO to raise up to $1.2bn on the bourse, citing unfavourable market conditions.
“The sentiment in Hong Kong towards IPOs is obviously a bit stronger and the recent IPOs have gone quite well notwithstanding the political background,” said an investment banker working on the ESR deal, speaking about the company’s decision to come back to the market.
Shares in ESR are expected to price on October 5 and make their trading debut in Hong Kong on November 1. CLSA and Deutsche Bank are co-sponsors on the deal.