China’s tourism seeks $2.16 billion in Hong Kong’s biggest list yet by 2022

People wear masks following the outbreak of the coronavirus disease (COVID-19) at the Sanya Duty Free Trade Complex in Sanya, Hainan Province, China, Nov. 25, 2020. Picture taken on Nov. 25, 2020. REUTERS/Tingshu Wang

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HONG KONG, Aug 12 (Reuters) – China Tourism Group Duty Free Corp ( 601888.SS ) aims to raise up to $2.16 billion through a new listing in Hong Kong, according to a term sheet reviewed by Reuters, in the which will be the largest stock sale in the city so far this year.

Shanghai-listed China Tourism plans to sell 102.76 million shares priced between HK$143.50 and HK$165.50 ($18.30 and $21.10) each, according to the prospectus conditions

The offer is already fully subscribed, according to two people with direct knowledge of the matter. The sources spoke on condition of anonymity because they were not authorized to discuss the matter with the media.

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China Tourism, which has built China’s largest duty-free retail network, did not respond to a request for comment on the offer’s launch or subscription fee.

The launch of the deal comes as southern China’s Hainan Island, where China tourism has several major outlets, remains under strict restrictions due to a COVID-19 outbreak.

The price range represents a 29.3% to 38.7% discount to the stock’s closing price of 201.19 yuan in Shanghai on Thursday. Shanghai shares fell 3.1% on Friday after the release of the Hong Kong deal.

Hong Kong stock sales of Chinese-listed companies are usually offered at a discount to entice investors to buy the shares, but China Tourism’s marked discount is higher than normal. The rate was chosen to help ensure the stock trades positively in the secondary market, one of the sources with direct knowledge told Reuters.

China Tourism’s Shanghai-listed shares have clawed back most of their losses since lockdowns in Hainan began to be ordered last week. Its shares are down 11% year to date.

China Tourism plans to set the final price next Thursday, according to the term sheet, and Hong Kong shares will start trading on August 25.

Almost 40% of the shares offered in the deal have been sold to core shareholders who will invest about $795 million, according to the term sheet.

Sanya, a resort city on the southern tip of Hainan Island at the center of the COVID outbreak, reported 1,690 symptomatic and 1,504 asymptomatic cases from August 1 to 10. read more

The duty-free shop operator’s deal, if it goes through, would top Tianqi Lithium’s ( 002466.SZ ) $1.71 billion deal, which opened in late June, to convert se in the largest share sale in Hong Kong in 2022.

Hong Kong’s Tianqi stock was priced at a 50% discount to its Shenzhen counterpart and has only traded slightly higher since it went public in mid-July.

“After Tianqi Lithium’s tepid performance, the only way they could get away with the China Tourism deal was by offering it at a decent discount,” said Aequitas Research director Sumeet Singh, which publishes on Smartkarma.

“If it goes well, other deals should follow, as the pipeline for Hong Kong deals is now quite full and needs to move soon.”

There have been $4.9 billion worth of initial public offerings and secondary share sales in the City this year, compared with $34.7 billion in the same period last year, according to Dealogic data.

It’s the slowest year for new listings since 2009.

($1 = HK$7.8432)

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Reporting by Scott Murdoch; Edited by Stephen Coates, Lincoln Feast and Kenneth Maxwell

Our standards: the Thomson Reuters Trust Principles.

Scott Murdoch

Thomson Reuters

Scott Murdoch has been a journalist for over two decades working for Thomson Reuters and News Corp in Australia. He has specialized in financial journalism for most of his career, covering Asia’s equity and debt capital markets based in Hong Kong.

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