Chinese milk producer China Youran Dairy Group is looking to raise up to HK$6.2 billion (roughly $800 million) from its Hong Kong IPO.
Backed by private equity firm PAG, China Youran is selling 715.4 million shares in the range of HK$6.98 and HK$8.66 apiece, according to a filing on Monday. Assuming the IPO is priced at the top end of its range, China Youran would hold a valuation of $4.2 billion.
There is a greenshoe option on the deal, which allows for the additional sale of 107.3 million shares. The deal has also locked in two cornerstone investors which include Harvest Private Wealth Citic Prudential, subscribing for a cumulative 7% of the stock in the offering.
China Youran plans on using three-quarters of the proceeds from the IPO to buy and construct dairy farms. The rest of the funds will be used for purchasing dairy cattle stock and working capital.
The company, which was established in 1984, along with producing and selling milk, engages in animal farming activities in China.
According to the company’s prospectus, citing Frost & Sullivan, China Youran is China’s top provider of products and services in the upstream dairy market. In 2020, China Youran’s revenue grew to 11.78 billion yuan from 7.67 billion yuan in 2019. Also, its profit rose to 1.54 billion yuan last year versus 801.88 million yuan in 2019.
The IPO of China Youran comes during a challenging time of attracting investors in Hong Kong, with inflation causing some worries. In the trading debut of SF Real Estate Investment Trust (HKEX: 2191), the stock plunged 17%. JD Logistics (HKEX: 2618), on the other hand, priced its Hong Kong IPO near the bottom end of its range.
But China Youran will hope that will end by the time it completes its listing. Chinese dental firm Angelalign Technology has already seen hot demand in its $375 million Hong Kong IPO, with retail investors oversubscribing to the offering 674 times during the first day of receiving orders, according to Bloomberg.
China Youran will start taking orders on its share sale today. The offering is set to be priced on June 10, with stock trading beginning on June 18.