IPOs: Postal Bank Heats Up in HK, Canadian Solar Hypes Spinco in NY

Bottom line: Upcoming IPOs by China Postal Bank in Hong Kong and Canadian Solar’s solar plant-building unit in New York should get strong receptions, though both may have to wait until after the Christmas holidays to launch.  

Conservative Postal Bank draws big investors

An upcoming mega IPO in Hong Kong by the stodgy Postal Savings Bank of China is shaping up as one of this year’s hottest new offerings, with word that it’s added domestic heavyweights including China Life (HKEx: 2628; Shanghai: 601628; NYSE: LFC) and Tencent (HKEx: 700) to its impressive list of early investors. In other IPO news across the Pacific, solar panel maker Canadian Solar (Nasdaq: CSIQ) is also drumming up hype for a new offering by its solar plant-building unit, which has landed some modest new financing from big-name western commercial lenders.

Each of these IPO stories has a different subplot, but a common theme is that both could be relatively hot despite distinctly cool sentiment these last few months towards new offshore Chinese listings. It’s not yet clear if either offering will make it to market by the end of next week, which is probably the latest they could occur before the traditional Christmas break. But even if they have to wait until next year, both could do reasonably well.

Postal Bank’s conservative stance would normally be an investor turn-off during good economic times, since the company isn’t a very active lender like most other Chinese banks. But as China’s economy slows sharply and many banks show signs of sitting on heaps of bad loans, Postal Bank is looking like an increasingly attractive alternative to investors who want exposure to China’s financial sector.

Meantime, the solar sector where Canadian Solar is one of China’s leading panel makers isn’t exactly a hot ticket right now due to oversupply problems. But the solar power plant building unit Canadian Solar is spinning off would be a first of its kind, and could be well positioned for growth in a not-too-distant future when solar power becomes commercially competitive with traditional fossil fuels.

Let’s begin with Postal Bank, which is shopping its massive $20 billion IPO to domestic investors after landing some big foreign names like Swiss banking giant UBS and Singaporean sovereign wealth fund Temasek as cornerstone investors last month. (previous post) In addition to China LIfe and Tencent, the bank has also landed Alibaba-affiliated (NYSE: BABA) Ant Financial as one of its pre-IPO investors, according to the latest media reports. (Chinese article)

China Life’s $5 Bln Bet

The biggest of the new investors is China Life, which will buy a hefty 33 billion yuan ($5.3 billion) worth of shares, giving it a stake of no more than 5 percent of the bank. Postal Bank will sell around 15 percent of itself in the offering, with previous reports saying it had already gotten $8 billion worth of commitments from cornerstone investors led by UBS. The absence of a price range in the latest reports means the offering is unlikely to come before Christmas, though it could still occur before Lunar New Year in February.

Next there’s Canadian Solar’s IPO for its solar plant-building unit, which has previously been called a spinco and will be centered on its Recurrent Energy unit. Canadian Solar disclosed in early November that it had made its first confidential filings for a New York IPO by the unit, and since then it has been releasing a steady series of announcements to show the unit can obtain the money it needs from big-name lenders to finance its operations.

The latest of those announcements have Canadian Solar saying it has received about $100 million from Deutsche Bank for plant construction in Japan (company announcement), and about $30 million from RBS for construction in Britain (company announcement). None of these deals is huge, but collectively they do show the new unit is quite capable of getting financing for its projects in a range of western markets. That could help to convince investors of the unit’s good growth prospects, and I do expect the listing should get a positive reception and ultimately raise up to $300 million.

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