PICC Group, Chinese state-owned insurer, raised $3.1 billion in Hong Kong’s biggest initial public offering in two years. PICC Property & Casualty Co., Ltd. (HKG:2328) priced its offering close to the bottom of an indicative range, highlighting the sentiments for new listings in much of Asia. The state-owned insurer was able to get comforting commitments from cornerstone investors for about $1.8 billion worth of stock offered in the IPO, with major investors being U.S. insurer American International Group (NYSE:AIG), China utility State Grid Corp, China’s leading gold miner, Zijin Mining Group, and China Life Insurance Company Ltd. (NYSE:LFC).
“PICC can probably get this deal done with a reasonable valuation and good names such as American International Group (NYSE:AIG) among its long-term investors,” said Nelson Yan, a fund manager at Sinocap Management (Hong Kong), and added “cornerstones are no guarantee of success in IPOs”.
People’s Insurance Company (Group) of China (PICC) priced the IPO at HK$3.48 per share, after marketing the offering at an indicative range of HK$3.42-HK$4.03 per share. The company offered 6.9 billion new shares, putting the total deal at HK$24 billion ($3.1 billion).
The Chinese insurer hired a record number of 17 underwriters to help get the deal done, including Bank of America Merrill Lynch, Morgan Stanley (NYSE:MS), and UBS AG (NYSE:UBS), as well Chinese firms such as ABC International and BOC International. The PICC offering follows a season of massive drop in IPO volumes in Hong Kong and in other major markets in Asia Pacific, including mainland China and Singapore, on concerns over Europe’s sovereign debt crisis and China’s economy.
“In addition to the overseas markets in Europe, investors may also be worried about a slowdown in China’s economy, so there are several concerns on the macro front,” said Olive Xia, an insurance analyst at Core Pacific Yamaichi in Shanghai. “Other insurance companies also tried to raise funds via share placements or convertible bonds or sub debt issuance, but the market demand is relatively weak or sensitive to the price,” she added.
The offering from PICC Property & Casualty Co., Ltd. (HKG:2328), paves the way for a few small deals still waiting to hit the Hong Kong market in the fourth quarter, the busiest time of the year for equity offerings. The upcoming IPO’s include a $200 million listing by natural gas producer AAG Energy, a $300 million IPO by engineering company Wison Group and a $150 million listing from thermal and coking coal miner Century Energy.
China International Capital Corp (CICC), Credit Suisse Group AG (NYSE:CS), Goldman Sachs Group, Inc. (NYSE:GS), and HSBC Holdings plc (LON:HSBA) (NYSE:HBC) acted as sponsors of the IPO. PICC is expected to debut on the Hong Kong stock exchange on Dec. 7.