China’s Hotpot Chain Haidilao Seeks $963M In Hong Kong IPO

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Haidilao International Holding Ltd., China’s biggest hot pot restaurant chain, is seeking to raise up to US$963 million in an initial public offering (IPO) in Hong Kong.

The Beijing-based firm is offering 424.5 million shares at HK$14.80 (US$1.88) to HK$17.80 (US$2.27) apiece, according to terms of the deal obtained by Bloomberg.

The five cornerstone investors including Chinese investment firm Hillhouse Capital Group and Morgan Stanley have agreed to buy a combined US$375 million of stock in the offering, it said.

The stock is expected to start trading on Hong Kong’s main board on September 26.

Haidilao’s IPO price range values the company at 25.1 times to 30.2 times its estimated 2019 earnings. The figures assume a so-called over-allotment option isn’t exercised, said Bloomberg citing people with knowledge of the matter.

Among all Chinese cuisine styles, hot pot had the largest market share in terms of 2017 revenue, holding 13.7% in the China’s cuisine market. Followed by Sichuan cuisine at 12.4% and Cantonese cuisine at 8.2%, according to the company’s prospectus.

As a Chinese eatery with more than 300 locations across the globe, Haidilao reported first-half revenue of RMB7.3 billion (US$1 billion) in 2018, up 54.4% year-on-year. Net profit increased 17% to RMB647 million (US$94 million) during the same period, according to its filling.

Founded in 1994, the company is known for serving spicy broths and providing attentive customer service including giving free manicures, shoulder massages and dance performances.

The company plans to use 60% of the proceeds for expansion plan, 20% to develop and implement new technology and another 15% to partially repay loans.

Among the five cornerstone investors, Hillhouse Capital and Shanghai-based investment management company Greenwoods Asset Management Ltd. have agreed to buy about US$90 million of the shares each.

Similarly, Morgan Stanley and Asian alternative investment management firm Snow Lake Capital will invest about US$80 million each, and Hong Kong-based Ward Ferry has committed about US$35 million.

CMB International Capital Ltd. and Goldman Sachs Group Inc. are joint sponsors of the listing.


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