Huishang Bank Lures Wealthy Individuals Back to Hong Kong IPOs

Huishang Bank Corp., a lender in China’s eastern province of Anhui, secured as much as $102 million of investments from billionaire Cheng Yu-tung and other wealthy individuals in its Hong Kong initial public offering.

Cheng, Asia’s fourth-richest man, agreed to buy 57.6 million shares valued at as much as $29 million at the top end of a marketed price range, according to a term sheet obtained by Bloomberg News yesterday. Huishang is the first major Hong Kong IPO in more than two years to attract wealthy individuals as cornerstone investors, data compiled by Bloomberg show.

Companies that went public in Hong Kong this year have gained an average 10 percent from their offer prices after adjusting for deal size, data compiled by Bloomberg show. In 2012, IPO stocks gained 3 percent, the data show. Hong Kong’s benchmark Hang Seng Index has advanced 6.2 percent this year.

“There seems to be a bit more momentum for primary issues in Hong Kong right now,” said Philippe Espinasse, former head of equity capital markets for Asia at Nomura Holdings Inc. and author of “IPO: a Global Guide.”

The last Hong Kong IPO of more than $500 million that attracted cornerstone commitments from wealthy individuals was the May 2011 offering of casino operator MGM China Holdings Ltd. Billionaire hedge-fund manager John Paulson and Kirk Kerkorian, the founder of MGM Resorts International, invested in that offering.

Cornerstone investors receive a guaranteed stock in an IPO in return for agreeing to hold the shares for at least six months. Huishang and some shareholders are seeking as much as $1.3 billion in the IPO, the terms show.

Hongqiao Investment

China Vanke Co., the country’s biggest developer, plans to buy as much as $442 million of stock as a cornerstone investor for Huishang, the terms show. Individuals named Xu Ping and Kan Hung Chih, as well as machinery makers Jiangsu Huijin and China General Technology (Group) Holdings Co., will also buy shares as cornerstone investors, according to the terms.

Cheng, who controls the world’s largest listed jewelry chain, has a net worth of $20.7 billion, according to the Bloomberg Billionaire Index. In March 2011, he bought $100 million of stock in the Hong Kong IPO of aluminum producer China Hongqiao Group Ltd., according to data compiled by Bloomberg.

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