PE-backed China Yongda returns with scaled down IPO
China Yongda Automobile Services has re-launched its IPO a month after pulling out of the Hong Kong listing due to weak market demand. The company has reduced its price to HK$6.60 per share, down from a range of HK$7.60-10.80, and cut the size of the offering by 20% to 253.5 million shares, not including over-allotment. If successful, it should raise HK$1.67 billion ($215 million).
Baring Private Equity Asia remains a cornerstone investor, having committed to buying $80 million worth of shares instead of as much as $120 million previously, while China-focused PE firm Prax Capital is a new participant, agreeing to buy $24 million of shares. The two firms will cover 48.4% of the offering.
However, Oman Investment Fund, previously slated to contribute $30 million as a cornerstone investor, has dropped out.
Yongda, which operates 66 sales outlets and has approval to open another 25, is the largest BMW dealership in China. It is the fourth Chinese auto dealer to try and raise funds in Hong Kong in the past two years, following China Zhengtong Auto Services, Zhongsheng Group and Baoxin Auto Group.
The reduced price represents a 2012 forward price-to-earnings multiple of 6.5x, compared to 8-11.3x in the first listing attempt. The valuation is comparable to those of China Zhengton and Baoxin, and the firm is in line to have a similar market capitalization on listing.
It is hoped that pre-launch demand for shares is strong enough to push the deal through. Market sentiment in general remains poor. According to Thomson Reuters, 46 companies had withdrawn or postponed offerings worth a total of $7.7 billion as of June 1.
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