UPDATE 1-Carlyle, Farallon bet on China funeral growth with HK IPO

Reuters

(Corrects second paragraph to say Carlyle executives visitedthe company in 2010, not last year)

* Carlyle, Farallon, China Cinda to buy $45 mln worth ofshares

* Fu Shou Yuan to price IPO on Dec. 12, debut on Dec. 19

* Profits jumped 72 pct in six months to June from yearearlier

By Elzio Barreto

HONG KONG, Dec 9 (Reuters) - Carlyle Group LP, hedgefund firm Farallon Investors and China Cinda have agreed to buy$45 million worth of shares in Fu Shou Yuan International GroupLtd as China's largest provider of death-care services seeks upto $215 million in a Hong Kong IPO.

Carlyle, whose co-founder William Conway visited Fu ShouYuan's main cemetery in Shanghai with a group of eightexecutives in December 2010, agreed to buy $25 million worth ofshares, with San Francisco-based Farallon putting up another $10million, according to the IPO prospectus unveiled on Monday.

China Cinda Asset Management Co Ltd, the country'slargest bad debt manager, will invest a total of $10 millionthrough two separate subsidiaries. The group of so-calledcornerstone investors receive a guaranteed allocation inexchange for agreeing to retain their stakes for a set period.

Fu Shou Yuan launched the initial public offering on Monday,offering 500 million new shares in an indicative range ofHK$2.88-HK$3.33 each, according to a term sheet of the IPO.

The IPO is set to price on Dec. 12, with a debut on the HongKong stock exchange slated for Dec. 19.

The investors are looking to benefit from growth in anindustry forecast to reach nearly 100 billion yuan ($16.4billion) by 2017 from an estimated 53 billion yuan in 2013,according to market researcher Euromonitor. That's equivalent toannual average growth of 17 percent in the period.

Burial services, which include tomb sales that have no pricecontrols, are the fastest growing and biggest segment of theindustry, expected to rise 17.9 percent a year through 2017. AtFu Shou Yuan's Shanghai cemetery, for example, a six-by-sixmetre plot can cost as much as 500,000 yuan at the top end,including the tombstone and other services.

Funeral services, which include ceremonies and bodyhandling, are expected to expand 16.9 percent a year through2017.

The boom in services should benefit from the increase inChina's elderly population and the number of deaths in thecoming years, the company said in its prospectus.

The number of deaths is forecast to rise to 10.4 million ayear in 2017 from 9.7 million in 2012, as the number of peopleover the age of 65 grows to 14.4 percent of the population from11.1 percent, Euromonitor estimates.

Fu Shou Yuan posted 118.14 million yuan of profit in the sixmonths ending June 30, up 72 percent from a year earlier, whilerevenue grew 32 percent to 306.7 million yuan over the sameperiod.

Citigroup Inc is the sole sponsor and globalcoordinator of the offer, the term sheet showed, with CIMB and UBS also helping to underwrite the deal.

The banks stand to earn up to $8.6 million, equivalent to upto 4 percent of the proceeds, in commissions and incentive fees.

($1 = 6.0817 Chinese yuan)

(Reporting by Elzio Barreto and Yantoultra Ngui in KualaLumpur; Editing by Michael Urquhart and Matt Driskill)

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