Warburg Pincus-backed ESR Relaunches Larger HK IPO Of Up To $1.45b

ESR Cayman Ltd, backed by private-equity firm Warburg Pincus, relaunched a bigger Hong Kong initial public offering (IPO) that aims to raise as much as $1.45 billion, according to a term sheet seen by Reuters.

The relaunch of what would be Hong Kong’s second-biggest IPO this year, after the float of AB InBev’s Asia-Pacific unit, comes as companies forge ahead with listing plans in Asia’s top financial hub following a months-long freeze during frequently violent anti-government protests.

ESR, which manages a range of property-focused funds and its own property investments, started book-building on Monday.

It is selling about 654 million shares with a split of 42.9% primary shares and 57.1% secondary, totalling 21.5% of its enlarged share capital, at an indicative range of HK$16.2 to HK$17.4 ($2.07-$2.22), the term sheet showed.

Based on that range, the firm could raise $1.35 billion to $1.45 billion before any over-allocation option is included, giving it a market capitalisation of $6.27-$6.74 billion after the float, according to the term sheet.

The IPO has an offer size adjustment option allowing to sell more secondary shares, equalling up to 15% of the base deal. ESR can also exercise a 15% “greenshoe”, or over-allotment, option if there is demand.

ESR had planned to raise up to $1.24 billion in its earlier IPO attempt in June, but postponed the deal citing “current market conditions”.

Sources, however, told Reuters that ESR had targeted a relatively aggressive valuation of between $6.28 billion and $6.75 billion, making the deal a hard sell at the time.

ESR declined to comment.

At least seven existing shareholders are selling shares in the IPO, including Warburg Pincus unit WP OCIM, Goldman Sachs Investments Holdings (Asia) Ltd and e-commerce firm JD.com Inc’s Jingdong Logistics Group Corp, the term sheet showed.

ESR has lined up $585 million from one cornerstone investor, OMERS Administration Corporation, among Canada’s largest pension funds, based on the mid-point of the price range. It had not secured any cornerstone investors in its June IPO attempt.

CLSA and Deutsche Bank are joint sponsors for the IPO.

ESR was formed in 2016 by the merger of the Japan-centric Redwood Group and China-focused e-Shang, co-founded by Warburg Pincus in 2011.

Its shares will be priced on Oct. 25 and trading is scheduled to start on Nov. 1.

IPO activity picks up

ESR’s float will be among a clutch of recent listings seen as tests of investor sentiment in Hong Kong that has been roiled by a five-month-long political crisis.

Having topped the global charts in 2018 for funds raised through IPOs, Hong Kong is currently lagging behind both the New York Stock Exchange and Nasdaq with $18.5 billion raised as of mid-October, Refinitiv data showed. That compared with $21.9 billion on the NYSE and $23.3 billion on Nasdaq.

But IPO activity in the city has picked up, marked by the September relaunch by AB InBev’s Asia-Pacific unit.

Budweiser Brewing Company APAC Ltd raised about $5 billion in Hong Kong’s biggest and the world’s second-largest IPO so far this year.

It had cancelled a plan for a bigger float in July citing “several factors, including the prevailing market conditions”.

Among other planned listings, JS Global Lifestyle Company Ltd, on Monday launched a Hong Kong IPO of up to $464 million, according to a marketing term sheet seen by Reuters.

Backed by Chinese private-equity firm CDH Investments, JS Global is selling about 500 million shares with an indicative price band of HK$5.55 to HK$7.25 per share.

JS Global did not respond to a request for comment.

The company owns Chinese kitchen appliances maker Joyoung and U.S. home appliances maker SharkNijia.

Reuters