GF Securities Seeks Up to $3.6 Billion in Hong Kong Offering

GF Securities Co., the fourth-biggest Chinese brokerage by market value, is seeking to raise as much as $3.6 billion from a first-time share sale in Hong Kong.

The Guangzhou-based company is offering 1.48 billion shares at HK$15.65 to HK$18.85 each, according to terms for the deal obtained by Bloomberg News. The price range represents a 43 percent to 52 percent discount to GF Securities’s last close in Shenzhen.

Chinese brokerages are seeking funds to expand as transaction volumes soar in the country’s $6.1 trillion stock market. Market leader Citic Securities Co. and third-largest Haitong Securities Co. are planning Hong Kong share sales that could raise more than $9 billion.

“GF has a scale and business diversity comparable to Haitong’s, and we find its discount to Haitong very attractive,” Nelson Yan, chief investment officer at Changjiang Securities Co.’s Hong Kong unit, said by phone. “The uptrend in the Chinese stock market boosts GF’s growth prospects.”

Cornerstone Buyers

The top end of the marketed range values GF Securities at 1.62 times estimated book value and 13.9 times estimated profit in 2015, people with knowledge of the matter said, asking not to be identified as the matter is private. Haitong Securities trades in Hong Kong at 1.82 times book value and 15.6 times estimated earnings this year, according to data compiled by Bloomberg.

GF Securities has agreed to sell $1.87 billion of stock, or more than half the offering, to cornerstone investors, the terms show. Fubon Life Insurance Co. agreed to buy $300 million of shares, while L.R. Capital committed $250 million, according to the terms. So-called cornerstone investors typically agree to hold on to their stock for six months in return for guaranteed allocation.

Citic Securities’s Hong Kong-listed shares closed Friday at a 33 percent discount to its Shanghai stock, while the discount for Haitong Securities is 39 percent, according to data compiled by Bloomberg.

GF Securities expects to price offering on March 31 in Hong Kong and start trading April 10, the terms show. Goldman Sachs Group Inc. and GF Securities’s Hong Kong unit are joint sponsors of the share sale.

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