China Machinery Said to Raise $500 Million in Hong Kong IPO

China Machinery Engineering Corp., the state-owned contractor with projects in Nigeria, Serbia and Ivory Coast, raised $500 million in an initial public offering in Hong Kong, two people with knowledge of the matter said.

The Beijing-based unit of China National Machinery Industry Corp. sold 718 million shares at HK$5.40 apiece, said the people, who asked not to be identified because the information is private. The shares were marketed at HK$4.10 to HK$5.40 apiece, according to a prospectus published Dec. 10.

The fundraising will push Hong Kong past Malaysia as Asia’s third-largest destination for IPOs this year, after Japan and China, according to data compiled by Bloomberg. Companies raised $6.6 billion in the city before China Machinery’s sale, compared with $6.8 billion in Kuala Lumpur, the data show.

A Hong Kong-based external spokeswoman for China Machinery declined to comment on the pricing.

China Machinery is expanding overseas as the country seeks closer ties with developing nations and greater access to raw materials abroad. The company offers engineering services and sells equipment and machinery in more than 150 countries and regions, primarily in Asia, Europe and Africa, the prospectus shows.

Relative Value

The offering price range values China Machinery at 5.2 times to 6.8 times estimated profit for next year, one of the people said. China Communications Construction Co. (1800), the nation’s second-biggest builder by market value, trades in Hong Kong at about 7.6 times analysts’ estimates for 2013 earnings, according to data compiled by Bloomberg.

China Machinery posted profit of 991 million yuan ($159 million) on sales of 10.4 billion yuan in the first six months of this year, the prospectus shows. That compares with profit of 639 million yuan on sales of 9.8 billion yuan, in the year earlier period.

The company plans to start trading in Hong Kong on Dec. 21, according to the prospectus. ABCI Securities Co., BOC International Holdings Ltd., CIMB Securities Ltd. and ICBC International Holdings Ltd. managed the share sale, the document shows.

Five so-called cornerstone investors, including People’s Insurance Co. (Group) of China Ltd., bought a combined $165 million of shares in the IPO, according to the prospectus. Cornerstone buyers get guaranteed allocation in IPOs in return for a pledge to hold the stock, typically for six months.

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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