ESR plans to raise up to US$1.24b in HK's biggest IPO this year

Hong Kong

LOGISTICS real estate developer ESR Cayman Ltd has opened the books on an initial public offering (IPO) that could raise up to US$1.24 billion, in what would be Hong Kong's biggest float so far this year, according to a term sheet seen by Reuters on Wednesday.

ESR Cayman, backed by private equity firm Warburg Pincus LLC , was initially due to launch its offering on Monday, but held off as markets were shaken by fear of escalating Sino-US trade tensions weakening the global economy.

The company, which manages a range of funds and vehicles as well as its own directly held property investments, is selling 560.7 million shares with a split of 58 per cent primary shares and 42 per cent secondary - totalling 18.4 per cent of its enlarged share capital - at an indicative range of HK$16.2 to HK$17.4 (S$2.82 to S$3.03) a share, the term sheet showed.

At that range, the firm could raise US$1.16 billion to US$1.24 billion before any greenshoe or over-allocation option is included. That would represent a market capitalisation of up to US$6.75 billion after the IPO.

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

Main backer Warburg Pincus plans to cut its holdings to about 28 per cent from 38.35 per cent.

The deal is due to price on June 12 and trading of the shares is scheduled to start on June 20.

ESR declined to comment. Warburg Pincus, Goldman and JD.com did not immediately respond to a request for comment.

The float comes as the Hong Kong market is beginning to heat up, with two other deals which could raise more than US$1.6 billion between them, due to price on Wednesday.

A successful float by ESR would further provide a boost for the city which is far behind the New York Stock Exchange and Nasdaq in raising capital via IPOs, with just US$5.9 billion to its credit as of May, compared with a combined US$26.9 billion raised by the US exchanges, data from Refinitiv showed.

Last week, Reuters reported that Chinese e-commerce giant Alibaba Group Holding Ltd was considering a second listing in Hong Kong of up to US$20 billion in what could be a transformative deal if other New York-listed Chinese tech groups followed its lead.

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

Describing itself in its prospectus as the largest Asia-Pacific logistics-focused property platform, ESR also said it plans to use the proceeds to pay down debt and redeem preference shares, as well as to invest in property assets and other potential acquisitions.

CLSA and Deutsche Bank are joint sponsors for the IPO. REUTERS