The market has been abuzz recently with fund-raising plans of two Chinese firms.
One deal involves Legend Holdings, the parent of personal-computer giant Lenovo (00992.HK), with reports saying that the firm aims to raise as much as US$3 billion when it goes public later this year in Hong Kong.
The second deal pertains to Mango TV, the online video unit of the commercially savvy broadcaster Hunan TV. The company is said to have raised a cool 1 billion yuan (US$161 million) in its first private funding round.
Such a sum is quite large for a first round of outside fund-raising. And the response from private investors suggests that Hunan intends to build Mango into an attractive IPO candidate with strong prospects in the online video space.
Let’s begin this fund-raising round-up with Legend, whose colorful chief Liu Chuanzhi has been talking about a 2015 IPO for much of the last two years.
This particular offering was last in the headlines back in January, when media reported the company had settled on Hong Kong for the listing after previously planning to offer shares on one of China’s domestic stock exchanges. Those reports added that the offering was likely to come in the second half of this year, with a fund-raising target of US$2-3 billion.
Now the latest reports indicate the plan is advancing on schedule, with Legend now said to be aiming for an IPO in July with the US$3 billion upper limit confirmed as its fund-raising target.
If it reaches that upper limit, the offering would be one of the biggest for Hong Kong in the last two years, approaching the US$3.2 billion raised by nuclear power plant builder CGN Power (01816.HK) when it listed in the market late last year.
The latest reports say leading Chinese investment bank CICC and Europe’s UBS are lead underwriters for the deal, and that Legend will formally seek permission for a listing at a hearing with the securities regulator in Hong Kong later this week.
The company’s largest holding is its controlling stake in Lenovo, but it’s also far more diversified with assets in a range of other areas, many held by its Hony Capital private-equity arm. I’ve previously said the offering could get a moderately strong reception due to Legend’s diversified nature, and will reaffirm that outlook as the deal moves forward.
I’m a bit more excited by the Mango TV deal, which has seen the company turn to outside investors for the first time with this 1 billion yuan fund-raising. The deal has seen Mango’s owner, Hunan TV, sell 10 percent of the company to a group led by China Mobile (00941.HK; CHL.US), China’s dominant mobile carrier.
That values Mango at 10 billion yuan, or about US$1.6 billion, instantly making it one of the sector’s most valuable players.
Reports first surfaced last summer that Hunan TV was preparing to pump 1 billion yuan into Mango, and this funding appears to be part of that move. The broadcaster is already known as one of China’s most successful and commercially focused state-run program makers, operating the highly popular Hunan Satellite TV station.
Its more recent foray into online broadcasting reflects its commercial savvy. And this pairing with China Mobile will give Mango preferential access to China Mobile’s 800 million subscribers, many of whom watch online video over their phones.
This acceptance of outside funding strongly indicates Hunan TV’s intention to make Mango a compelling, standalone online video company, capable of competing with the likes of sector leaders like LeTV (300104.CN), Youku Tudou (YOKU.US) and Baidu’s (BIDU.US) iQyi.
Accordingly, we can probably expect to see the company raise even bigger funds from both Chinese and international investors over the next one to two years, with a well-received IPO in either Hong Kong or on one of China’s domestic markets possible as soon as the first half of 2017.
Bottom line: Legend’s Hong Kong IPO this year will attract moderate interest and raise more than US$2 billion, while Mango TV could seek up to US$800 million in new private funding later this year en route to a potential Hong Kong IPO as soon as 2017.
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