XCMG Construction Said to Cancel Plans to Raise $1.1 Billion in Stock Sale

By Fox Hu and Kelvin Wong - Sep 25, 2011 12:36 PM GMT+0700

XCMG Construction Machinery Co., China’s biggest crane maker, scrapped plans to raise about $1.1 billion in a share sale in Hong Kong after some underwriters backed out of commitments to buy any unsold stock, three people with knowledge of the matter said.

Bankers on the deal may meet tomorrow to try to restructure the offering, said one of the people, who declined to be identified as discussions are private. XCMG pulled the sale after some underwriters backed out of an agreement to purchase any stock the company failed to sell, a commitment known as hard underwriting, the people said.

Sany Heavy Industry Co., the construction-equipment maker run by China’s richest man, is also delaying the sale pricing of its $3.3 billion Hong Kong stock sale as the city’s benchmark Hang Seng Index posted its biggest weekly loss since 2008. The sell-off has caused investors to lose money on 44 out of 51 initial public offerings this year, according to data compiled by Bloomberg, with shoemaker Hongguo International Holdings Ltd. tumbling 15 percent on its debut on Sept. 23.

Shenzhen-traded XCMG had planned to sell stock amounting to about 15 percent of the enlarged share capital at HK$21.35 ($2.74) to HK$26.39 apiece, people with knowledge of the transaction said Sept. 23.

Two phone calls made outside of regular business hours to XCMG’s headquarters in Xuzhou City, Jiangsu province, went unanswered. Reuters reported earlier that XCMG had delayed the offering, citing people it didn’t identify.

Market Value

XCMG said in a January 5 statement to the Shenzhen stock exchange that it planned to sell as much as a 20 percent stake in Hong Kong. XCMG fell 3.3 percent in Shenzhen trading last week, reducing the company’s market value to 41 billion yuan ($6.4 billion).

The Hang Seng Index slumped 9.2 percent last week to close at a more than two-year low. The Bloomberg Hong Kong IPO Index, which measures the first-year performance of new stocks, has fallen 28 percent this year.

Xiao Nan Guo Restaurants Holding Ltd. scrapped a HK$581 million ($75 million) IPO, according to a Sept. 21 filing. China Everbright Bank Co. pulled a $6 billion offering in August, having considered cutting the size of the sale in half as stocks dropped.

Sany, headed by Chairman Liang Wengen, is pushing ahead with an investor roadshow after delaying the sale pricing, previously set for Sept. 26, Tang Xiuguo, president of its parent company, said Sept. 23.

Enough Cashflow

The share-sale delay won’t affect Sany’s expansion plans, including construction of a U.S. plant that’s due to open this year, as the company has enough cashflow to finance operations he said.

Companies have raised $40 billion in Hong Kong share sales this year, led by China Construction Bank Corp.’s $8.3 billion offering last month. The tally is about the same as in the year- earlier period.

BOC International Ltd., Goldman Sachs Group Inc., Morgan Stanley (MS), China International Capital Corp., Credit Suisse Group AG (CSGN), ABCI Securities Co. and BNP Paribas (BNP) SA were among banks arranging the sale for XCMG, according to the people.

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net