BBMG is said to raise $768 million in Hong Kong IPO


Updated Thu, 23 Jul 2009 00:00:00 GMT

BBMG Corp., the cement supplier to several 2008 Beijing Olympics venues, raised HK$5.95 billion ($768 million) in the second-biggest Hong Kong initial public offering this year, said three people familiar with the sale.

The Beijing-based company sold 933.3 million new shares at HK$6.38 each, the top end of a HK$5.18 to HK$6.38 offering range, after receiving orders for more shares than it was selling, said the people, who declined to be identified before a public announcement.

BBMG, supplier of cement to Beijing's "Bird's Nest" National Stadium, drew buyers including China's sovereign wealth fund, as a $585 billion stimulus package helps drive a rebound in the nation's economy and a rally in Hong Kong stocks. It was the first IPO in almost a year to attract so-called cornerstone investors, a sign that Hong Kong IPOs may rebound from the slowest first half since 2003.

"Construction materials are an attractive sector and the company is a major beneficiary of China's efforts to stimulate spending," said Andy Mantel, managing director of hedge fund manager Pacific Sun Investment Management (HK) Ltd., before the pricing. "The addition of prominent cornerstone investors and a very reasonable valuation helped boost this IPO's appeal."

The sale of a 25 percent stake values BBMG at $3.1 billion, or 13.9 times full-year 2009 profit as estimated by banks managing the IPO. Anhui Conch Cement Co., China's largest maker of the construction material, trades at 23.8 times this year's estimated earnings in Hong Kong, according to data compiled by Bloomberg.

Institutional Demand

China Investment Corp., the country's $200 billion sovereign fund, and four other cornerstone investors including U.S. hedge fund OZ Management LP, and China Life Insurance (Group) Co. bought $175 million worth of shares in the IPO, according to BBMG’s prospectus. Cornerstone investors are guaranteed stock in the institutional portion of an offering in exchange for a pledge to hold their investments for a certain period of time after the stock begins trading.

Hong Kong individuals ordered about 770 times the shares initially reserved for them, two of the people said, quoting preliminary numbers. Institutional demand was about 95 times the shares initially available to them after subtracting shares reserved for the cornerstone investors, said one of the people, citing an early estimate.

Hong Kong Market

Mainland Chinese companies have tapped Hong Kong's stock market for more than $2 trillion of capital since 1993, representing nearly 60 percent of total fundraising in the city, Paul Chow, the outgoing chief executive officer of Hong Kong Exchanges & Clearing Ltd., said in a March presentation.

Sinopharm Holdings Ltd., China's largest drug distributor, may raise $1 billion in a Hong Kong IPO as early as September, said two people familiar with the sale. Wilmar International Ltd., the world’s largest publicly traded palm oil company, may take its China business public in Hong Kong this year to raise about $2 billion, said a person with knowledge of the plan.

China's stimulus spending may boost demand for cement by 100 million tons this year and next, equivalent to 7 percent of the country's production of the material in 2008, according to a July 5 JPMorgan Chase & Co. report on BBMG, which cited data from China Cement Industry Association.

BBMG, together with associated company Taihang Cement, was the largest supplier of cement in Beijing, Tianjin and Hebei province in northern China last year, said the prospectus.

Olympic Construction

The company also supplied most of the building material used in the construction of the National Aquatics Center, known as the "Water Cube," for last year's Olympics, the prospectus said.

BBMG, which generated about 70 percent of last year's revenue from cement and other building materials used for insulation, refraction and fixture, also develops properties and owns commercial real estate in Beijing for rental income, the JPMorgan report said.

JPMorgan, Macquarie Group Ltd. and UBS AG managed BBMG's stock offering. The stock is scheduled to start trading July 29.

Wu Xiangyong, BBMG's board secretary in Beijing, is traveling with senior management to market the share sale and couldn't immediately be reached for comment.

Marie Cheung, a spokeswoman for JPMorgan in Hong Kong, and Chris Cockerill, a spokesman for UBS in the city, declined to comment. Paul Scanlon, a Hong Kong-based spokesman for Macquarie, couldn't immediately be reached.