Haidilao prices HK IPO at top of the range, raising US$963m

Hong Kong

CHINESE hotpot chain Haidilao raised US$963 million in its Hong Kong initial public offering (IPO), pricing its shares at the top of an indicated range at HK$17.80, three people close to the deal said on Tuesday.

Haidilao, which mainly serves spicy Sichuan style hotpot and is popular for the free services and entertainment such as manicures and board games offered to waiting customers, sold about 8 per cent of its enlarged equity capital, giving it a valuation of about US$12 billion.

The high valuation shows a resilient investor appetite for Hong Kong stocks despite weak markets amid fears of Sino-US trade tensions.

The company, co-founded by former tractor factory worker Zhang Yong in 1994, had set a price range of HK$14.80 to HK$17.80 per share last week.

Haidilao could raise as much as US$1.1 billion in total if a 15 per cent "greenshoe", or over-allotment option, is exercised after the shares begin trading.

Haidilao plans to use the proceeds to fund its international expansion into markets including the United Kingdom and Canada, and to develop and implement new technology in a bid to better control food safety after a number of food hygiene incidents in two of its Beijing restaurants and in one of its Singapore outlets.

Haidilao already operates in Japan, South Korea, the United States and Singapore, and has more than 300 restaurants across China.

The company's IPO attracted prominent firms, including Chinese investment house Hillhouse Capital Group and Morgan Stanley, as cornerstone investors who together committed to buy US$375 million worth of shares in the IPO.

Its shares are expected to start trading on the Hong Kong Stock Exchange on Sept 26.

The IPO comes at a delicate time for Hong Kong, with the benchmark Hang Seng Index falling 20 per cent from its January peak amid trade tensions and many other listings, such as smartphone maker Xiaomi's US$5.4 billion deal, trading below their IPO price.

The city's IPO pipeline is, however, still packed.

Food delivery-to-ticketing services online platform Meituan Dianping will debut on Thursday after a US$4.2 billion IPO, in what is seen as a key test of investor appetite for listings in the financial hub.

An undercover news report by a Chinese newspaper exposed a food hygiene scandal at two of Haidilao's Beijing restaurants last year. And one of its outlets in Singapore was suspended for two weeks earlier this year for violating hygiene standards, Singapore media reported.

The company acted swiftly after the hygiene issues cropped up by acknowledging them, and started to offer live streams from its kitchens in the Chinese capital.

CMB International and Goldman Sachs are leading Haidilao's IPO. REUTERS