China Railway Signal & Communication Corp. is seeking to raise as much as $1.8 billion from an initial public offering in Hong Kong, in what would be the first major new listing in the city since China’s recent stock market plunge.
The Beijing-based company, the world’s largest provider of train traffic-control systems, is selling 1.75 billion shares at HK$6.30 to HK$8 each, according to terms for the deal obtained by Bloomberg. Sixteen cornerstone investors, including China Railway Group Ltd. and Shanghai Zhenhua Heavy Industries Co., have agreed to buy more than half the offering.
China Railway Signal is seeking to become the first major new Hong Kong listing since a China stock rout wiped out $4 trillion in value and triggered unprecedented government intervention to support equities. The deal will add to the $18.5 billion raised by first-time share sales in the city this year, data compiled by Bloomberg show.
Beijing Infrastructure Investment Co. has agreed to buy $60 million of stock in the offering, while China Shipping Group Co. will invest $100 million and China Life Insurance Co. has committed $50 million, according to the terms. Cornerstone investors typically agree to hold on to their shares for at least six months in return for guaranteed allocation.
State-owned China Railway Signal plans to use about 20 percent of the proceeds to fund domestic and overseas acquisitions, the terms show.
Several other companies are eyeing Hong Kong listings as well. China International Capital Corp., Morgan Stanley’s former investment-banking partner in China, has filed pre-listing documents with the exchange to raise as much as $1 billion. Education International Cooperation Group Ltd., a Chinese provider of educational services backed by CVC Capital Partners, is planning an offering that could raise about $300 million late this year.
A number of other deals also are in the pipeline, at various stages of preparation.
China Railway Signal’s offering comes amid a major Chinese push for rail development. The government is seeking to use state-owned rail companies to win lucrative contracts and project political influence abroad, targeting markets including Africa, Latin America and Southeast Asia.
State-owned CSR Corp. and China CNR Corp. were combined in June to form CRRC Corp., a train equipment maker dwarfing Siemens AG and Alstom SA. The merger aimed to create economies of scale to help China compete more aggressively for overseas rail deals.
Other rail-signal makers have been expanding their market shares as well. Tokyo-based Hitachi Ltd. agreed in February to buy Finmeccanica SpA’s rail business and a signals affiliate, to narrow the gap with Germany’s Siemens and France’s Alstom.
In May, the Chinese government included rail as one of 10 focus industries in a blueprint to make China into one of the world’s most advanced industrialized economies.
China Railway Signal plans to price the offering July 31 and start trading Aug. 7, the terms show. Citigroup Inc., Morgan Stanley and UBS Group AG are joint sponsors of the listing, while Macquarie Group Ltd. is financial adviser.
— With assistance by Joyce Koh, and Clement Tan