China Feihe Limited has begun attracting investors for its initial public offering in Hong Kong late Monday. If things go according to plan, the Chinese baby formula maker could earn as much as HK$9 billion ($1.15 billion).
The company, according to the terms of the deal disclosed by Bloomberg, is selling 894 million securities at HK$7.50 to HK$10 per group. The price range is $8.6 billion to $11.5 billion in market value.
The bid would be the second attempt by Feihe to pursue an initial public proposition in Hong Kong. In May 2017, it had applied for a listing in the area. In 2013, the company went private in the wake of a flood of Chinese companies exchanged by Wall Street.
The baby formula sector in China was scandalized in 2008 when a tainted milk crisis claimed six victims and infected 300,000, forcing companies to demand foreign-made products than those produced locally.
In June, the nation unveiled a plan to increase the yield of domestic baby formula in a bid to regain consumer confidence.
The government aims to achieve a self-sufficiency rate of 60 percent along with improving quality and strengthening consumer confidence in the $27 billion infant formula industry for domestic brands.
The newly announced plan will also support domestic dairy producers in acquiring or establishing milk supply bases overseas as well as tightening regulations on imports of milk powder and online sales platforms.
Feihe is looking to capitalize on the proceeds for purposes which include repayment of the company's offshore obligations, future buy-out options, and financing its operation of a new manufacturing facility, the terms, some of which have yet be disclosed in full detail, indicate.
Before China Feihe Limited will commence regular trade on November 13, the company will stop taking investor orders by November 5, sources with knowledge of the matter, said.
According to a preliminary prospectus, JPMorgan Chase & Co, China Merchants Securities Co Ltd., CCB International Holdings Ltd. are joint sponsors of the bid.
The global infant nutrition market was valued at $71.5 billion in 2018 and is estimated to reach $99 billion in 2024.
There are certain factors propelling the growth of the market, which include the increase in working mother population, higher spending on baby health, and the rising demand for organic baby food.
In the next few years, it is expected that the global infant nutrition market will show healthy growth. In the last few years, the sale of infant nutrition products in developed countries has shown a single-digit growth rate.
