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iPhone assembler Foxconn readies China's biggest IPO since 2015

[BEIJING] Hon Hai Precision Industry Co is racing ahead with an initial public offering of its automated factory division that may become China's biggest debut since the 2015 stock market crash.

Foxconn Industrial Internet Co, a unit of Apple's most important assembly partner, won approval on Thursday to list in Shanghai about a month after publishing a prospectus that outlined plans to spend 27.3 billion yuan (S$5.67 billion) on expansions into cutting-edge technology. That speed underscores the anticipation around the Taiwanese company that embodies billionaire Terry Gou's ambition of moving beyond assembling PCs and phones for the world's top electronic brands.

Known as FII, the business could command a valuation of as much as 400 billion yuan by some estimates - on a par with Sony Corp. With sales of 355 billion yuan in 2017, its revenue is about the same as Walt Disney Co or HP Inc. The fundraising could be the 11th largest on the mainland and would be one of the highest-profile tech listings in Shenzhen or Shanghai in years, as the government courts a long under-represented sector.

"The size of the IPO should be pretty close to what's disclosed in the prospectus," said Amy Lin, a Shanghai-based analyst with Capital Securities Corp. Ms Lin estimates the stock could command a share-price multiple of 15 to 19 times earnings for its debut.

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Foxconn, which makes smartphones, cloud computing equipment and robots, wants the 27 billion yuan to fund projects including artificial intelligence and fifth-generation wireless technologies, positioning Hon Hai even more centrally in the tech supply chain. Foxconn representatives didn't respond to a request for comment.

Taipei-listed Hon Hai climbed as much as 3.2 per cent on Friday, its biggest intraday gain since since Jan 19.

The debut will come amid a push to attract capital from Taiwan, a self-governed island over which China claims sovereignty.

Beijing has introduced plans to welcome Taiwanese investment in some of the nation's most restricted sectors, though pro-independence Taiwan President Tsai Ing-wen has warned that such moves could suck away much-needed capital.

Foxconn's debut also dovetails with an effort to bring tech listings back to the mainland. Chinese enterprises have long pursued the prestige and capital associated with marquee overseas debuts. But technology businesses from Alibaba Group Holding Ltd to Tencent Holdings Ltd have in recent years outstripped their old-economy peers to become the nation's largest, and virtually none are traded domestically.

"It's hard to estimate the actual IPO size of Foxconn, but it should be big," said Dai Ming, a Shanghai-based fund manager at Hengsheng Asset Management Co.