China Youran Dairy Group Ltd., a Chinese dairy product maker, and its shareholder, private equity firm PAG, are seeking to raise as much as HK$6.2 billion ($799 million) in a Hong Kong initial public offering.
The company and funds managed by PAG are selling 715.4 million shares at HK$6.98 to HK$8.66 each, according to the prospectus. It starts taking investor orders from Monday and the offer is expected to be priced on June 10. The stock is set to begin trading on June 18 in Hong Kong.
Youran Dairy’s IPO comes as Hong Kong first-time share sales go through a bit of a dip because of volatile markets and concerns about rising inflation. The most recent listing, Central China Management Co., dropped 12% on its debut last week while the $3.2 billion IPO of JD Logistics Inc., the shipping and delivery arm of e-commerce giant JD.com Inc., priced toward the lower end of its marketed range last month.
Still, the city’s legions of retail investors are once again putting their money into IPOs, with the retail portion of the $375 million offering of Chinese maker of clear braces Angelalign Technology Inc. already 674 times oversubscribed on its first day of order-taking, according to the Hong Kong Economic Journal.
Founded in 1984, Youran Dairy produces and sells fresh milk and engages in related animal farming activities in China. It used to be a subsidiary of dairy giant Inner Mongolia Yili Industrial Group Co. until Hong Kong-based private equity firm PAG invested in 2015. Youran Dairy recorded a net profit of 1.54 billion yuan ($241 million) in 2020, up from 801.9 million yuan in the previous year, according to its prospectus.
The share sale attracted two cornerstone investors, Citic Prudential and Harvest Private Wealth, who have agreed to subscribe for about $50 million in shares, based on the mid-point of the price range, the prospectus shows.
The offering consists of 493.4 million new shares and 222 million existing shares, prior to the so-called greenshoe option, according to the prospectus. The maximum price would give the company a market value of $4.2 billion. Proceeds from the IPO will be used for building new dairy farms and feed mills and purchasing quality dairy cows.
PAG and Yili hold 42.9% and 40% stakes respectively in the firm. Huatai International and Credit Suisse Group AG are joint sponsors for the listing.
