Cheng Yu-Tung’s Chow Tai Fook Said to Hire Banks in $4 Billion Jewelry IPO

Billionaire Cheng Yu-tung’s Chow Tai Fook Group hired Deutsche Bank AG (DBK), Goldman Sachs Group Inc. (GS), HSBC Holdings Plc (HSBA) and JPMorgan Chase & Co. (JPM) for an initial share sale of its jewelry unit that may raise as much as $4 billion, two people with knowledge of the matter said.

The jewelry retail chain controlled by Cheng, chairman of property company New World Development Co., plans to start trading in Hong Kong as early as in the fourth quarter, said the people, who declined to be identified because the information is private. The initial public offering may raise at least $3 billion, the people said.

Chow Tai Fook joins consumer-goods companies including Prada SpA and Samsonite LLC in seeking to raise funds in Hong Kong, where retail sales are surging as visitors from China spend on watches, shoes and clothes. The company has more than 1,000 stores in mainland China, Hong Kong, Taiwan and Malaysia and plans to double that number by 2020, according to Chow Tai Fook’s website.

“It is an attractive IPO,” said Ben Kwong, chief operating officer of KGI Asia Ltd., a Hong Kong-based brokerage. “Chow Tai Fook is a long-standing brand in Hong Kong and investors like China-related consumer stocks.”

Citigroup Inc. (C), Credit Suisse Group AG (CSGN) and UBS AG (UBSN) will also help arrange the offering as so-called joint bookrunners, the people said. Deutsche Bank, Goldman Sachs, HSBC and JPMorgan will act as joint global coordinators for the sale, they said.

Hotels and Stores

The jewelry chain, with 30,000 workers, has annual revenue of more than HK$30 billion ($3.9 billion), according to the website of the Hong Kong-based company that was founded in 1929. Chow Tai Fook, which Cheng bought in 1956, also has investments in hotels, property, public transportation and department stores, its website shows.

Fanny Yu, executive assistant at Chow Tai Fook, declined to comment.

Companies have raised $7.8 billion in IPOs in Hong Kong this year, according to data compiled by Bloomberg. HSBC, which helped manage the first yuan-denominated IPO in the city last month, is the top-ranked underwriter, followed by Goldman Sachs, the data show. JPMorgan is in ninth place.

The tally for underwriters is poised to jump in coming months as Prada, Samsonite, Glencore International Plc and China Guangfa Bank Co. complete share sales in Hong Kong.

Prada Gauges Demand

New China Life Insurance Co., the Chinese insurer backed by Zurich Financial Services AG, hired at least eight banks for the Hong Kong portion of an initial public offering that may raise as much as $5 billion, people with knowledge of the matter said.

Bank of America Corp., BNP Paribas SA, China International Capital Corp., Deutsche Bank, Goldman Sachs, HSBC, JPMorgan and UBS will manage the Hong Kong sale, said the people, who declined to be identified because the process is private. The Beijing-based insurer plans to start trading in the second half after selling stock in Hong Kong and Shanghai, the people said.

Prada, the Italian producer of Miu Miu bags and Church’s shoes, has started gauging investor demand for an IPO, according to a term sheet obtained by Bloomberg News. The sale may raise about $2 billion, people with knowledge of the matter have said.

Milan Station Holdings Ltd., a retailer of used handbags and apparel, surged 66 percent to close at HK$2.77 yesterday, its first day of trading in Hong Kong.

L’Occitane

L’Occitane International SA (973), the French maker of skin-care products that listed in Hong Kong last year, has advanced 39 percent since it started trading on May 7, 2010 -- triple the gain of the benchmark Hang Seng Index.

Sales of luxury goods such as bags, watches and jewelry in China may more than double to about 180 billion yuan in 2015 from 80 billion last year, McKinsey & Co. said in a report in March. The 2015 estimate will be equal to 20 percent of global luxury spending, the consulting company said.

Buyers from the Greater China region, which includes Hong Kong, Macau and Taiwan, may account for 44 percent of global luxury-goods sales by 2020, up from 15 percent, CLSA Asia- Pacific Markets said earlier this year. The CLSA estimate includes spending by Chinese abroad.

In Hong Kong, retail sales rose an average of 21 percent in the first three months of the year, compared with 19 percent in 2010. Tourists in the former British colony spent a record HK$210 billion last year, 33 percent more than in 2009. Visitors from mainland China spent the most per capita, according to a statement from the city’s tourism board last month.

Still, the 23 companies that sold shares in IPOs in Hong Kong this year are trading less than 0.5 percent higher on average from their offer price, underperforming an 8.1 percent gain for U.S. IPO stocks, data compiled by Bloomberg show.

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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