China Modern Dairy Holdings Ltd., which operates farms and produces raw milk, may raise as much as HK$4.43 billion ($571 million) in a Hong Kong initial public offering, a sales document shows.
The company is offering 1.2 billion shares at HK$2.89 to HK$3.69 each, according to the terms for the sale, which is being managed by Citigroup Inc. and UBS AG. New shares account for 67 percent of the stock on offer and 33 percent is existing equity, the term sheet shows. Modern Dairy plans to set the price for its shares on Nov. 20 and start trading on Nov. 26.
Two of the three Chinese dairy companies collectively seeking $1.1 billion in IPOs this quarter declined in trading following their share sales as skepticism lingered two years after a poisoned-milk scandal. About 300,000 children in the nation were sickened by melamine-tainted milk two years ago, prompting 190 million yuan ($29 million) in government subsidies to dairy companies in an effort to bolster the industry.
“No parents would risk their children’s life, unless they have insufficient income to buy imported milk powder,” said Jason Yuan, an analyst with UOB Kay-Hian Ltd. in Shanghai.
Global Dairy Holdings Ltd. fell 10 percent on the first day of trading following an initial offering that raised $204 million, and Yashili International Holdings Ltd. lost 12 percent after its IPO raised $349 million. Of 63 companies that listed in Hong Kong this year, only three had debuts worse than the two dairies, according to data compiled by Bloomberg.
Five investors, including the Government of Singapore Investment Corp. and China Mengniu Dairy Company Ltd. will buy $130 million worth of Modern Dairy shares, according to the document.
Jennifer Lewis, a spokeswoman for Singapore’s GIC, confirmed in an e-mail that it’s one of the investors. Mengniu spokeswoman Zhao Yuanhua didn’t answer calls to her mobile phone.
Modern Dairy has an option to sell an additional 180 million shares after the stock lists, according to the sale document. The stock sale would add to the record $46 billion raised through 64 initial offerings in Hong Kong this year, data compiled by Bloomberg show.