Hong Kong Equity Issue: Midea Group’s HK$35.7bn Hong Kong listing
Market reopening
The HK$35.7bn (US$4.58bn) listing of Midea Group injected new life into the lacklustre Hong Kong market, spurring a rush of activity.
Before Midea’s deal in September, only US$2.5bn had been raised from Hong Kong IPOs in 2024, mostly supported by friends-and-family orders. Despite the challenging backdrop, Midea achieved the largest Hong Kong listing in three years.
While the Shenzhen-listed home appliance giant is a household name in China, joint sponsors Bank of America and CICC highlighted the company’s use of technology and the growth potential of its commercial and industrial business to the more than 500 investors they met.
However, investors were concerned about the weak Hong Kong IPO market and slowing consumption in China, even though more than 40% of Midea’s total sales come from overseas.
To sweeten the offer, the company decided to sell its H-shares at an attractive discount to its A-shares. The base deal of 492m primary H-shares was marketed in an indicative price range of HK$52.00–$54.80 each, representing a discount of 21%–25% to its A-share pre-deal close.
That was wider than the around 15% discount between the A-shares and H-shares of smaller rival Haier Smart Home.
The competitive pricing drew 18 cornerstone investors to the transaction, with a total investment of US$1.26bn. While most were Chinese, including Cosco Shipping, BYD and Boyu Capital, there was also participation from global investors such as UBS Asset Management and US trading firm Jump Trading.
Robust demand allowed Midea to close the books a day earlier than planned, price the offer at the top of the range, and fully exercise an offer size adjustment option of 73.8m shares.
The issue price represented a discount of 19.8% to Midea’s A-share close of Rmb62.37 (HK$68.29, US$8.75) on the pricing day.
More than 230 institutional investors participated in the deal with the books 8.1 times covered.
Geographically, 46% of the shares went to Asian investors, 38% to the US and 16% to EMEA. By investor type, long-only investors took 70%, hedge funds 26% and corporates or high-net-worth individuals 4%.
The retail tranche was 5.3 times subscribed.
Midea’s Hong Kong shares jumped 7.8% to HK$59.10 on their trading debut on September 17. The stock ended the year at HK$75.55, 37% above the issue price, after a greenshoe of 15% was fully exercised.
The stellar performance drew investors’ attention back to the city’s IPO market and encouraged more sizable listings in the following months.
Citic Securities, Goldman Sachs and UBS were joint global coordinators and bookrunners on the Midea deal. CMB International, GF Securities (Hong Kong) and Huatai International were bookrunners.
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