Sinopec Unit Joins China Galaxy to Seek $3.6 Billion in IPOs

Sinopec Engineering Group Co., a unit of China’s biggest refiner, and China Galaxy Securities Co. are seeking as much as a combined $3.6 billion in Hong Kong initial public offerings this month after first-time share sales in the city slumped to a four-year low.

China Petrochemical Corp.’s Sinopec Engineering offered 1.33 billion shares at HK$9.8 to HK$13.1 each to raise a potential HK$17.4 billion ($2.2 billion), terms for the deal show. Galaxy Securities, a brokerage controlled by China’s sovereign wealth fund, may sell 1.57 billion shares at HK$4.99 to HK$6.77 apiece to raise as much as HK$10.6 billion, according to another term sheet.

The sales will make May the biggest month for IPOs in Hong Kong since November, when People’s Insurance Company (Group) of China Ltd. raised $3.6 billion, data compiled by Bloomberg show. Companies completed $1.1 billion of initial share sales in the city in the first quarter, the least since early 2009, according to the data.

“The sentiment in Hong Kong and China is still cautious but people can be opportunistic and yield hungry,” said Nicholas Yeo, a fund manager at Aberdeen Asset Management Plc, which oversees about $300 billion globally. “If these two deals are priced attractively, they may garner some decent demand.”

Galaxy Securities and Sinopec Engineering are marketing the IPOs as New Zealand prepares to raise as much as NZ$1.6 billion ($1.4 billion) from the sale of a stake in power plant operator Mighty River Power Ltd., the country’s biggest IPO.


Underwriters are unlikely to reap big rewards: Galaxy Securities hired 21 investment banks for its share sale, a record for a Hong Kong IPO, according to one term sheet and data compiled by Bloomberg. Based on the average 2.5 percent fee for IPOs last year, underwriters would collect an average $1.6 million for the deal, the data show.

Sinopec Engineering has 13 joint bookrunners on its offering, terms for that deal show. The company builds facilities and provides oilfield services, according to Sinopec Group’s website. The price range values the company at nine to 12 times estimated 2013 earnings, said two people with knowledge of the matter. They asked not to be identified because the information is private.

Wison Engineering Services Co., a Chinese provider of engineering and construction services for the petrochemical industry, raised $239 million from a Hong Kong IPO in December. The company has rallied 37 percent from its offer price and trades at 10.1 times estimated 2013 profit, data compiled by Bloomberg show.

An external spokeswoman for Sinopec Engineering declined to comment on the offering.


Galaxy Securities’s price range values the company at 1.2 to 1.5 times estimated 2013 book value, two other people with knowledge of the matter said. An external spokeswoman for Galaxy Securities declined to comment on the IPO.

So-called cornerstone investors in the IPO include insurer AIA Group Ltd. with an investment of $50 million and Khazanah Nasional Bhd, Malaysia’s sovereign wealth fund, with $100 million, terms show. They also include China Life Insurance Co. with $30 million, Sino Life Insurance Co. with $50 million, China Cinda (HK) Asset Management Co. with $20 million, and a China unit of General Electric Co. with $30 million.

Cornerstone investors typically agree to hold their stock for six months in return for guaranteed allocation in an IPO.

Founded in January 2007, Galaxy Securities is controlled by Central Huijin Investment Ltd., a unit of China Investment Corp., according to the brokerage’s website.

Sinopec Engineering’s cornerstone investors include China Shipping (HK) Holdings Co. with $100 million, China Aerospace Investment Holdings Ltd. with $60 million, Aerospace Science & Technology Finance Co. with $50 million, China Export & Credit Insurance Corp. with $50 million, Zhongrong International Trust Co. with $50 million, Albertson Capital Ltd. with $30 million and China CAMC Engineering Co. with $10 million, terms show.

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