Huishang Bank seeks $1.3 bln in HK's biggest bank IPO since 2010

Reuters

* Industrial firm Jiangsu Huijin becomes 6th key investor

* Cornerstone buyers to take nearly half of shares

* Offer to be priced on Nov. 6, stock to debut on Nov. 12

By Elzio Barreto

HONG KONG, Oct 29 (Reuters) - Provincial Chinese lenderHuishang Bank Corp Ltd has set the final cornerstone in placefor what could be the biggest initial public offering in HongKong by a bank in over three years.

Based in the booming industrial heartland of Anhui province,Huishang wants to sell up to $1.3 billion of shares in a litmustest for bank IPOs as financial sector shares recover from afirst-half slump.

A term sheet for the deal seen by Reuters on Tuesday showedHuishang has added little-known privately held industrialcompany Jiangsu Huijin to a core of investors who are nowcommitted to taking nearly half the stock.

Mainland Chinese banks like Huishang, whose home city ofHefei has been described by The Economist magazine as having thefastest-growing metropolitan economy in the world, are waitingin line to tap capital markets. They could raise around $11billion through Hong Kong IPOs between now and the first half ofnext year, according to Thomson Reuters estimates.

The deal to sell shares in Huishang, with 374.1 billion yuan($61.6 billion) in total assets at the end of September, is thebiggest Hong Kong listing by a bank since Chongqing RuralCommercial Bank raised $1.7 billion in its IPO inSeptember 2010, according to Reuters data.

It will come hard on the heels of an IPO by Bank ofChongqing, another small-sized city commercial bank, that isseeking to raise up to $593 million in a Hong Kong offer thatwill price on Thursday.

Huishang will used the funds to bolster its capital base,with the deal due to be priced on Nov. 6 and a debut on the HongKong stock exchange slated for Nov. 12.

Jiangsu Huijin has businesses ranging from constructionmachinery to hotels, according to a source familiar with theIPO. It joins Chow Tai Fook, the conglomerate behind listedjeweler Chow Tai Fook Jewellery Group Ltd., Chineseproperty group China Vanke Co Ltd and three othercornerstone investors.

CORNERSTONE COMMITMENT

Together the six investors have pledged to buy up to $639million worth of shares in the IPO. At nearly 50 percent, thecommitment from the cornerstone buyers is well above the averageof 30 percent for Hong Kong IPOs, indicating underwriters'determination to guarantee enough demand to make the deal takeoff.

The Hong Kong exchange's Hang Seng H Financial index is down about 9.1 percent year-to-date, though it hassoared nearly 17 percent since reaching a low for the year inearly July, raising hopes over the valuations for banks lookingto go public.

Huishang is selling 2.61 billion shares, according to theterm sheet. Some 95.7 percent of the stock is in the form of newshares, offered in an indicative range of HK$3.47 ($0.45) toHK$3.88 each.

At those prices, the stock is being sold at an equivalent toa 2013 full-year forecast price-to-book value of 0.93 to 1.01.Chongqing Rural Commercial Bank, with a market value of $4.5billion, trades at 12-month forward P/B value of 0.67, while itspeers trade at 0.85 P/B, according to Thomson Reuters data.

BOC International, Citic Securities International , JPMorgan, Morgan Stanley and UBS AG were hired as sponsors of the IPO.

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