China’s largest infant milk formula company, China Feihe Limited, is relaunching its bid to become a publicly listed entity, hoping to raise up to $1.14 billion through an initial public offering in Hong Kong. Feihe, its name means the “flying crane” in Chinese.

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Feihe started collecting subscriptions on Monday from global investors for 90 per cent of the offering at an indicative range of HK$7.5 to HK$10 ($0.96-$1.28) a share, while 10 per cent of the sale would go to retail investors. The shares will begin trading in Hong Kong on November 13.

The price range represents a multiple of 12.2-16.2 times Feihe’s forecast 2020 earnings and gives the firm a market capitalisation of $8.5 billion to $11.4 billion after the IPO, added the people, who declined to be identified as the information was not public yet. 

Why it matters?

The deal is the second attempt at a public listing for Feihe after it backed off of plans for a Hong Kong IPO in 2017. It later pressed ahead with a deal to buy U.S nutritional supplement supplier Vitamin World.  The float also comes against the backdrop of Beijing’s ambitions to make Chinese brands more competitive globally and restore more consumer confidence in domestic formula. 

The top end of Feihe’s fundraising plan would make the Chinese company the third-biggest IPO in Hong Kong this year, coming after Budweiser Brewing Company APAC’s US$5.8 billion offer last month and ESR Cayman’s US$1.6 billion sale last week. Chinese sportswear manufacturer Topsports International Holdings also expects to raise US$1 billion after pricing earlier this month.

Increasing market shares in the infant milk industry, aligning with Beijing’s interests

Morgan Stanley-backed Feihe had a 7.3% market share in 2018, taking local and international brands into account, which made it the largest in the country, according to its prospectus filed with the Hong Kong Stock Exchange. 

Feihe recorded 10.4 billion yuan in revenue last year, up from 5.9 billion yuan a year earlier. Its full-year 2018 profit was 2.24 billion yuan, compared with 1.16 billion the previous year, the prospectus showed. 

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