China Tourism wants US$2.16 billion for Hong Kong’s biggest listing in 2022

People wear face masks following the outbreak of the coronavirus disease (COVID-19) at a store at the Sanya International Duty-Free Shopping Complex in Sanya, Hainan province, China, November 25, 2020. REUTERS/Tingshu Wang

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HONG KONG, Aug 12 (Reuters) – Chinese travel group Duty Free Corp ( 601888.SS ) is seeking to raise up to $2.16 billion in a new listing in Hong Kong, under terms reviewed by Reuters, in what would be the city’s largest share sale this year.

Listed Chinese travel company Shanghai plans to sell 102.76 million shares at a price of HK$143.50 to HK$165.50 each (US$18.30 and US$21.10), according to a statement of terms.

The proposal has already been fully signed off on, 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 chain, did not respond to requests for comment on the launch of the deal or the cost of the subscription.

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

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

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

Shares in Shanghai-listed China Tourism clawed back most of their losses after Hainan began imposing quarantine measures last week. Its shares are down 11% year-to-date.

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

Nearly 40% of the shares offered in the deal were sold to cornerstone shareholders, who are investing about $795 million, according to the terms of the deal.

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

If the duty-free shop operator’s deal goes through, it would surpass Tianqi Lithium’s ( 002466.SZ ) $1.71 billion deal in late June and become the biggest Hong Kong stock sale of 2022.

Tianqi’s Hong Kong shares were valued at a 50% discount to the Shenzhen stock and have traded only marginally higher since debuting in mid-July.

“After Tianqi Lithium’s lukewarm performance, the only way to avoid the China Tourism deal is to offer it at a decent discount,” said Aequitas Research director Sumit Singh, who publishes on Smartkarma.

“If all goes well, other deals should follow, as the pipeline for deals in Hong Kong is now quite full and should start soon.”

The city saw $4.9 billion in IPOs this year, compared with $34.7 billion at the same time last year, according to Dealogic data.

This is the slowest year-to-date number of new listings since 2009.

($1 = HK$7.8432)

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

Our Standards: The Thomson Reuters Trust Principles.

Scott Murdoch

Thomson Reuters

Scott Murdoch has been a journalist with Thomson Reuters and News Corp in Australia for over two decades. For most of his career, he specialized in financial journalism and covered equity and debt capital markets in Asia, based in Hong Kong.

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