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Yale to invest in China Railway Construction

(China Daily/Agencies)
Updated: 2008-02-26 11:43

Yale University, home to the second-biggest North American college endowment fund, is investing $50 million in the first-time Hong Kong share sale of China Railway Construction Corp, said sources.

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Yale is among nine so-called cornerstone investors that will buy a combined $450 million worth of shares, the sources said, declining to be identified because the information has yet to be publicly announced.

China Railway Construction plans to raise as much as $5.4 billion. It is the world's largest share sale this year, according to Bloomberg data.

The stock offering is taking place amid the slowest start to Hong Kong's share sale market since 1999 and as more than 80 companies delayed or scrapped stock offerings worldwide after markets fell on concerns of a global economic slowdown.

"Last year was characterized by a lot of liquidity chasing all the IPOs," said Winson Fong, who manages about $600 million at SG Asset Management in Hong Kong. "This year we'll be more selective. This is one of the bigger ones in the beginning of the year. There will still be lots of demand for this IPO."

The cornerstone investors, which also include two Singapore government-backed funds and Hong Kong billionaires, are guaranteed stock in the share sale in exchange for a commitment to not sell the shares for 12 months, the people said.

It is a rare cornerstone investment for both Yale and Temasek Holdings Pte, Singapore's sovereign wealth fund, which is also buying $50 million worth of shares, they added.

China Railway Construction aims to sell as many as 2.45 billion yuan-denominated shares in Shanghai at 8 yuan to 9.08 yuan each for as much as 22.25 billion yuan ($3.11 billion), according to a statement to the Shanghai Stock Exchange late Monday.

It will offer about 1.71 billion shares in Hong Kong at HK$9.93 to HK$10.70 each for as much as HK$18.25 billion, said the people.

The Hong Kong offering values the company at 26.6 to 28.7 times this year's profit as estimated by banks arranging the sale, the sources said. China Railway Group Ltd, its closest rival, trades at about 41 times this year's earnings, according to Bloomberg data. The two companies each control about 45 percent to half of China's railway construction work, according to a Macquarie Group Ltd report dated February 5

Citigroup Inc, CITIC Securities Co and Macquarie are arranging the share sales.

China Railway Construction is scheduled to start trading in Shanghai on March 10, it said in a document on Feb 15. It will start trading in Hong Kong on March 13.


(For more biz stories, please visit Industry Updates)



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