Warburg Pincus To Back Renhe IPO

HONG KONG (Reuters) – Renhe Commercial Group, which develops underground shopping centers in China, plans to brave turbulent markets and begin marketing a Hong Kong IPO on Monday to raise up to $658 million, people familiar with the deal said.

If it succeeds, Renhe’s listing would be the first in Hong Kong in more than a month as the global financial crisis has devastated investor appetite for risk.

Renhe is selling 15 percent of its enlarged share capital in an initial public offering handled by BOC International, HSBC, Morgan Stanley and UBS.

The company will on Tuesday start selling 3 billion shares at a range of HK$1.40-HK$1.71 each, and plans to set a final offering price on Oct. 9 ahead of a trading debut on Oct. 15, one of the sources said.

U.S. private equity firm Warburg Pincus [WP.UL] will buy HK$389 million ($50 million) worth of IPO shares, the source said.

Three of Renhe’s IPO underwriters predict on average that the company will earn 4.7 billion yuan ($687 million) in net profit in 2009, the source said. The company is expected to earn HK$2.2 billion ($282 million) this year, according to a listing document, the source said.

At the middle of its IPO price range, Renhe would be valued at roughly 5.5 times forecast 2009 profits.

The index of mainland Chinese companies listed in Hong Kong .HSCE has fallen nearly 41 percent since the start of the year and numerous listing hopefuls have put their plans on hold.

The last listing in Hong Kong was August’s $1.5 billion dual Hong Kong and Shanghai IPO by China South Locomotive & Rolling Stock Corp Ltd (1766.HK: Quote, Profile, Research, Stock Buzz)(601766.SS: Quote, Profile, Research, Stock Buzz). Its Hong Kong shares closed on Friday at HK$2.93 each, or 12.7 percent above their HK$2.60 offering price. (US$=HK$7.8=6.8431 yuan) (Reporting by Ruth Wong and Tony Munroe; Editing by Jacqueline Wong)