Jun 28, 2011
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China's Sun Art to raise up to $1.1 bln in HK IPO-term sheet

Jun 28, 2011

June 28 - Chinese hypermarket operator Sun Art Retail Group is aiming to raise as much as $1.1 billion in a Hong Kong initial public offering, at a time a slide in global equity markets is forcing several companies to postpone or cancel their IPO plans.

Sun Art, a joint venture between Taiwanese conglomerate Ruentex Group and privately held French retailer Groupe Auchan SA , plans to sell 1.14 billion shares at a range of between HK$5.65 and HK$7.20 each, according to a term sheet obtained by Reuters.

Nine cornerstone investors, including sovereign wealth fund Government of Singapore Investment Corp (GIC), will take up 40 percent of the IPO, paying a combined $420 million, sources with direct knowledge of the deal said.

They said the offer was fully subscribed.

"Despite a slowdown in markets, attention is likely to be strong for offerings like Sun Art's," Shinyi Tsai, retail analyst at Yuanta Securities.

"Hypermarket is a low-margin business such that business scale matters. Sun Art happens to be the biggest now in China, larger than Walmart or Carrefour, and investors like the scale and the company's strong operational management," Tsai said.

Several other listing hopefuls have seen their dreams dashed by volatile markets.

China Outfitters Holdings on Monday delayed its Hong Kong IPO citing weak market conditions.

The supplier of men's apparel and distributor of Iconix fashion brand London Fog in China could have completed the offering this week but believes it can get a better price by waiting, a source with knowledge of that deal said.


Sun Art's IPO puts the company's market value at between $6.8 billion and $8.7 billion, translating into a valuation range of 24.7 times to 31.5 times 2011 earnings, sources with direct knowledge of the deal said.

The offer has a 15 percent greenshoe option, said the sources.

Gaoling Fund and private equity firm General Atlantic are each taking $70 million of the offer and will be observing a lock-up period of one year, according to the term sheet.

Besides GIC, investment firms Arisaig Asia, Brookside, Carmignac Gestion and a wholly-owned subsidiary of Malaysia's Khazanah as well as hedge funds Owl Creek and Tiger Global are taking $40 million each, with a lock-up period of about six months.

Sun Art plans to use 50 percent of the proceeds from the IPO to open new stores in China, said a source with direct knowledge of the plans.

Sun Art started pre-marketing of the IPO on Monday. Pricing of the offering is now expected on July 8, another source said. Listing is slated for July 15, said the source, declining to be named because the information is not public yet.

UBS AG , Citigroup and HSBC are the global coordinators and joint bookrunners for the deal.

The rest of the bookrunners include BNP Paribas, China International Capital Corp, Goldman Sachs and Morgan Stanley.

(Additional reporting by Stephen Aldred and Alison Leung; Editing by Jonathan Hopfner and Muralikumar Anantharaman)

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