Asia-Pacific Secondary Equity Issue: Midea Group’s HK$35.7bn follow-on
Market reopening The HK$35.7bn (US$4.58bn)follow-on offering of Shenzhen-listed 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 IPOs in the city in 2024, with most of the deals supported by friends-and-family orders.
Despite the challenging backdrop, Midea achieved the largest Hong Kong listing in more than three years.
While the Shenzhen-listed home appliance giant is a household name in China, joint sponsors Bank of America and CICC tailored Midea's investment narrative to the more than 500 investors they met before the deal launch. The leads highlighted Midea’s use of technology and the growth potential of its commercial and industrial business, which includes robots.
However, investors were concerned about the weak Hong Kong IPO market and slowing consumption in China, even though more than 40% of Midea’s sales come from overseas.
To sweeten the offer, Midea decided to sell its H-shares at an attractive discount to its A-shares. The base deal of 492m primary H-shares was marketed at HK$52–$54.80 each, 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 firm Jump Trading.
Robust demand allowed Midea to close books a day early, price the offer at the top of the range and fully exercise a greenshoe of 73.8m shares.
The price was a 19.8% discount to Midea’s A-share close of Rmb62.37 (HK$68.29, US$8.75) on pricing day.
More than 230 institutional investors participated with books more than eight times covered. Around half the demand came from new investors.
Around 46% of the shares went to Asian investors, 38% to the US and 16% to EMEA. Long-only investors took 70%, hedge funds 26% and corporates or high-net-worth individuals 4%.
The retail tranche was more than five times subscribed.
Midea’s Hong Kong shares jumped 7.8% to HK$59.10 on their trading debut on September 17 and ended the year at HK$75.55.
Its stellar performance drew investors’ attention back to the city’s ECM and encouraged more sizeable listings in the following months.
Citic Securities, Goldman Sachs and UBS were joint global coordinators and joint bookrunners. CMB International, GF Securities (Hong Kong) and Huatai International were bookrunners.
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