Citic Securities Said to Seek Up to $1.9 Billion in IPO Test for Hong Kong

Citic Securities Co. will attempt Hong Kong’s biggest initial share sale since June, testing demand for new shares after the city’s benchmark index dropped 11 percent in three months.

China’s largest brokerage by market value is seeking to raise HK$15.1 billion ($1.9 billion) by offering 995.3 million shares at HK$12.84 to HK$15.20 apiece, two people with knowledge of the matter said. Citic Securities executives will start meeting potential investors today, they said.

The sale would be Hong Kong’s biggest since Italian fashion retailer Prada SpA raised $2.5 billion in June. The Hang Seng Index is down 11 percent since Prada’s initial public offering was priced, and stock offerings have dwindled amid Europe’s escalating sovereign debt crisis and a faltering U.S. recovery. China Everbright Bank Co. canceled a share sale of about $3 billion in August.

“A few IPOs got pulled recently and investor appetite for new stock is not as strong as in the first half,” said Binay Chandgothia, a Hong Kong-based fund manager at Principal Global Investors, which oversees more than $200 billion. “People will look at it as an indicator for the IPO market.”

The offering price range values Citic Securities at 1.18 to 1.39 times estimated 2011 book value and at 13.4 to 15.9 times forecast 2011 earnings, according to a term sheet for the deal obtained by Bloomberg News.

Eleven Chinese brokerages listed in Shanghai trade at an average price-to-book multiple of 1.73 for 2011 and at 15.2 times estimated full-year earnings, according to data compiled by Bloomberg.

Oct. 6 Debut

Citic Securities, which sold shares in an initial public offering in Shanghai in 2003, has a market value of 122 billion yuan ($19 billion) as of yesterday’s close. It is 24 percent owned by Citic Group, China’s first state-owned investment corporation that was created in 1979.

Shares of Citic Securities fell 0.2 percent to 12.25 yuan at 1:12 p.m. in Shanghai today. The Beijing-based company aims to start trading in Hong Kong on Oct. 6, the people said. Raymond Tang, a Citic Securities spokesman, didn’t immediately respond to a phone call seeking comment on the share sale.

Temasek Holdings Pte and Kuwait Investment Authority are among early investors who agreed to buy $850 million of stock in the share sale, according to the term sheet. They are among so- called cornerstone investors who get guaranteed shares in the offering in return for a pledge not to sell their stock immediately.

Bank of America Corp. (BAC), BOC International Holdings Ltd., Bocom International Holdings Ltd., CCB International (Holdings) Ltd., Citic Securities International, CLSA Ltd., HSBC Holdings Plc. (5), Haitong International Securities Group Ltd., ICBC International Holdings Ltd. and Morgan Stanley (MS) are managing the offering.

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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