Reuters - JD Health International Inc., a big China online health care company, is seeking to raise up to $3.5 billion in what is set to be Hong Kong's biggest initial public offering of the year, a term sheet showed.

The deal which could value the unit of e-commerce company at nearly $29 billion when a greenshoe option is included comes during a good year for China's health care sector as a result of the coronavirus.

By comparison, its biggest competitor, Alibaba Health Information Technology, has a market capitalization of around $34.6 billion.

JD Health plans to sell 381.9 million shares in a range of HK$62.80 and HK$70.58, according to the term sheet. A greenshoe option to sell a further 15% of stock would take the size of the initial public offering up to $4 billion.

According to its draft prospectus, JD Health is the largest online health care company in China by revenue - logging 10.8 billion yuan ($1.6 billion) last year. It had 72.5 million annual active users as of June 30 compared with 53.5 million at the same time last year.

It is also China's largest online retail pharmacy with a 29.8% market share, according to a Frost & Sullivan report.

The fundraising is set to lay the groundwork for greater competition in China's health care market Aequitas Research analyst Zhen Zhou Toh said.

"Raising money now is implying that they will be fighting to gain as much market share as possible in the near future, either by building out their network of offline and online pharmacies or increase its online presence by offering discounts," he wrote on the Smartkarma platform this month.

Six cornerstone investors led by GIC, Tiger Global and BlackRock have taken up to $1.35 billion worth of stock in the deal, the term sheet showed.

Book building begins Wednesday and the shares are due to be priced on Tuesday.

The initial size of the deal represents 12.2% of JD Health's enlarged share capital and the greenshoe, if exercised, will take that to 13.8%.

JD Health shares are expected to start trading Dec. 8. The company did not immediately respond to a request for comment.