Mar 15, 2010
The Business Times

Minzhong IPO may raise up to US$200m

The firm has chosen to list in S'pore because of GIC link, say some observers

A MUCH-AWAITED mega listing of a Chinese company on the Singapore Exchange (SGX) is finally in the works after a near two-year dearth.

China Minzhong Food Corporation, which lodged its preliminary prospectus with the Monetary Authority of Singapore on Friday, is expected to raise between US$150 million and US$200 million in an initial public offering (IPO), sources told BT.

The Fujian-based food processor – backed by Government of Singapore Investment Corporation (GIC) and buyout fund Olympus Capital – will be Singapore's largest IPO since the financial crisis.

Sources say Minzhong's IPO will be priced at seven to 10 times earnings per share. But going by their market-cap estimates of US$500 million to US$700 million, this substantial IPO may be shy of joining the billion-dollar club with the likes of Yangzijiang, Cosco Corp, Yanlord, Ying Li and China Fishery.

Hong Kong-listed China Green, its industry peer that is slightly bigger, is trading at about 12 times forward price-to-earnings.

JPMorgan, Kim Eng Corporate Finance and Macquarie are the joint issue managers, underwriters and lead managers for Minzhong's IPO, while OCBC is the co-lead manager and co-placement agent.

Some market observers note that Minzhong has chosen to list in Singapore because of the GIC link.

GIC holds its 32.6 per cent stake in Minzhong via investment vehicle Tetrad Ventures Pte Ltd and Olympus Capital holds a 33.6 per cent stake after they paid a combined US$45 million for the stakes in April 2006.

Both wanted to exit the Chinese food processor since 2007 and had hired JPMorgan to advise on the share sale. But the listing plan was placed on the backburner when global financial crisis hit and hindered good valuation.

Minzhong then went for another round of financing, bringing in new shareholders CMIA Capital Partners, a China-focused private equity firm, and OCBC's Mezzanine Capital. CMIA holds a 24.2 per cent stake while OCBC's stake is believed to be less than 10 per cent.

Notwithstanding the economic downturn, Minzhong has recorded profit increases over the past three years, with the latest financial year posting a 32.5 per cent jump in earnings to 288.1 million yuan (S$46.6 million) as sales crossed one billion yuan, compared to 633.8 million yuan a year before.

With its transformation from a state-owned enterprise into a private company in 2004 and the series of fund-raisings, Minzhong would also be a rare Chinese company on SGX that is majority-owned by professionals rather than family members or management.

Minzhong chief financial officer Siek Wei Ting holds a 9.6 per cent stake, while three-quarters of it is held on trust for CEO Lin Guo Rong, chief operation officer Wang Da Zhang and chief technology officer Huang Bing Hui.

The company has secured two cornerstone investors, Fidelity Investment Management (Hong Kong) and Prudential Asset Management (Singapore) Ltd. They are subject to a six-month lock-up.

One market watcher noted that the presence of these cornerstone investors is testament that they "recognise the GIC factor and they take comfort in the higher level of governance in this company".

BT understands that the company obtained special approval from the Ministry of Finance to list here – as GIC, which manages Singapore's foreign reserves, is mandated to invest in overseas entities.