Hong Kong-based Chow Tai Fook Jewellery Co (周大福珠寶) told investors yesterday it is seeking to raise up to US$2.8 billion in an initial public offering (IPO) that would create a new publicly listed giant in luxury goods.
The company, controlled by Hong Kong real-estate tycoon Cheng Yu-tung (鄭裕彤), started booking orders for 1.05 billion shares, or 10.5 percent of its enlarged capital, at HK$15 to HK$21 each, according to Dow Jones Newswires.
The world’s biggest jewelery chain, with more than 1,300 outlets throughout Asia, is hoping investors will snap up the offering to capitalize on the growth in personal wealth in China, where Chow Tai Fook is a market leader.
Photo: Bloomberg
Analysts said demand for luxury goods looked set to remain strong despite a slowdown in Chinese economic growth and falls on local stock exchanges linked to concerns about domestic inflation and the eurozone crisis.
“We still see very good appetite for luxury goods listing in Hong Kong as we believe the short, medium and long-term outlook remains positive,” CLSA retail analyst Aaron Fischer said. “However, the valuation still needs to be reasonable, especially compared to their direct competitors.”
Heavy hitters of the China and Hong Kong business worlds, including Henderson Land’s (恆基地產) Lee Shau-kee (李兆基) and Alibaba’s (阿里巴巴) Jack Ma (馬雲), attended a lunch at the Hong Kong Convention Centre to hear Cheng’s presentation of the offering.
The 80-year-old Cheng told reporters he was “happy” to list his company and was confident of the IPO’s success, but added: “I do not intend to share the fortune by becoming a shareholder.”
Chow Tai Fook has a large network of stores in China plus outlets in Macau, Malaysia, Singapore and Taiwan. It also has diamond cutting facilities in South Africa and China, and manufacturing plants in China and Hong Kong.
It plans to expand its number of stores to more than 2,000 by the end of 2016, according to its Web site.
The company — a household name in China, but virtually unknown in the West — could raise the size of the offering to as much as US$3.4 billion depending on demand, Dow Jones Newswires reported citing a term sheet sent to investors.
With a listing planned for Dec. 15, Chow Tai Fook’s potential market capitalization of US$26.7 billion would put it among local heavyweights such as property giant Hutchison Whampoa.
Italian luxury fashion house Prada used Hong Kong as a gateway to tap the Chinese market earlier this year when it raised US$2.14 billion ahead of a listing on the Hong Kong stock exchange. It subsequently issued more stock to boost the total amount raised to more than US$2.46 billion.
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