Thu, Nov 02, 2017 - Page 11 News List

Strong IPO for China Lit

TENCENT TENACITY:China’s second-largest tech firm is seeking bank pitches for its Tencent Music IPO, a Spotify-like service that could raise at least US$1 billion

Bloomberg

China Literature Ltd (閱文集團), the online reading unit helping Tencent Holdings Ltd (騰訊) build an entertainment empire, raised US$1.1 billion alongside existing investors in its Hong Kong initial public offering (IPO), people with knowledge of the matter said.

The operator of the QQ Reading app and existing investors priced 151 million shares at HK$55 apiece, the top end of a marketed range, the people said, asking not to be identified because the information is private.

At the IPO pricing, China Literature would have a market capitalization of HK$49.9 billion (US$6.4 billion).

Shares are to begin trading on Wednesday next week, according to the prospectus.

A representative for China Literature declined to comment.

The Tencent unit sells electronic books (e-books) in a model similar to Amazon.com Inc’s Kindle Store, which offers different titles in China than in the US and elsewhere.

China Literature had 9.6 million works and 6.4 million writers as of June 30, according to its prospectus. Customers can pay for an entire book at once or buy a few chapters at a cheaper price before determining whether to keep reading.

The company also wants to leverage its works into other forms of entertainment, such as movies, television and anime, as Tencent aspires to create a Marvel-like empire.

Shenzhen-based Tencent became China’s second-largest technology company on the strength of its WeChat messaging app, which since has morphed into a portal for shopping, banking, gaming and consuming entertainment.

Tencent’s music unit, which provides a Spotify-like streaming service, is seeking bank pitches for an IPO that could raise at least US$1 billion, people familiar with the matter said yesterday.

Tencent Music Entertainment Group has asked advisers to pitch for a role on a share sale that could take place next year in Hong Kong or New York, the people said.

Tencent Music was spun out from its parent after merging with China Music Corp. It has deals in place to distribute songs from artists including Beyonce and Taylor Swift via licensing rights with some of the world’s largest record labels, including Universal Music Group, Warner Music Group and Sony Music.

Retail investors were enthusiastic about the Tencent e-book spinoff, placing orders for more than 600 times the stock initially available to them in the IPO, people with knowledge of the matter said earlier.

The portion of the deal reserved for institutional money managers was also oversubscribed several times, they said.

The Hong Kong overnight interbank rate, known as HIBOR, approached a nine-year high this week partly due to retail investors locking up funds for a clutch of IPOs, including China Literature and gaming device maker Razer Inc.

The rate also jumped when ZhongAn Online P&C Insurance Co (眾安保險) took orders for its US$1.5 billion IPO in September.

Companies are seeking listings amid a surge in the territory’s benchmark Hang Seng Index, which last month hit its highest level in nearly a decade.

Razer has set the terms for a Hong Kong IPO that could raise as much as US$545 million, while Yixin Group Ltd (易鑫集團), a unit of US-listed Bitauto Holdings Ltd (易車公司), has started gauging investor demand for a deal, according to terms for the deal obtained by Bloomberg.

China Literature’s offering is the fifth-largest IPO in Hong Kong this year, according to data compiled by Bloomberg.

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