China hotpot firm Haidilao tests investor appetite with $1 bln HK IPO
HONG KONG, Sept 11 (Reuters) - Haidilao International
Holding, one of China's most popular hotpot chains, is seeking
to raise up to $963 million in its Hong Kong initial public
offering to fund its international expansion into markets
including the UK and Canada.
Zhou Zhaocheng, Haidilao's chief strategy officer, told a
press conference in Hong Kong on Tuesday that the company plans
to open roughly 200 new restaurants in 2018, between 15 and 20
of which would be outside China.
Haidilao already operates in Japan, South Korea, the United
States, and Singapore, but Zhou said that it was also planning
to tap new markets, in particular the UK, Australia, Canada and
The company, which mainly serves spicy Sichuan style hotpot
and is popular for the free services and entertainment such as
manicures and board games offered to waiting customers, is
offering 424 million primary shares in a price range of HK$14.8
to HK$ 17.8 per share ($1.89-$2.27).
Haidilao plans to sell about 8 percent of its enlarged
equity capital in the IPO, giving it a potential valuation of up
to $12 billion. That is 85 percent of the $14.1 billion market
valuation of Yum China Holdings Inc, China's biggest
Zhou said that in the new markets, Haidilao's first step
would be to target those countries' large Chinese population,
and look to grow from there. It would also launch localised
menus to cater to different tastes.
The company could raise as much as $1.1 billion in total if
a 15 percent “greenshoe”, or over-allotment option, is exercised
after the shares begin trading.
Haidilao's IPO will test not just investor demand for a
Chinese food brand that is growing both domestically and
internationally but also the appetite for Hong Kong shares in
general amid a nearly 12 percent drop in the market this
year and as several other IPOs wait in the wings.
Haidilao, whose name originates from a mahjong term in
Sichuan province which literally means fortune, expects to
mainly use the funds raised from the IPO to finance its future
expansion and develop and implement new technology in a bid to
better control food safety after setbacks suffered since last
The hotpot chain managed to attract prominent firms, such as
Chinese investment house Hillhouse Capital Group, as cornerstone
investors who together committed to buy $375 million worth of
shares in the IPO.
Hillhouse and Greenwoods Asset Management have committed $90
million each; Morgan Stanley and Snow Lake Capital $80
million each and Ward Ferry $35 million.
Co-founded by former tractor factory worker Zhang Yong in
1994, Haidilao has grown into China's leading hotpot chain with
more than 300 restaurants across the country, and has already
entered overseas markets.
The company is widely known for its focus on attentive and
creative customer services, a rare emphasis point for many
Chinese catering firms targeting the mass market. That also
helped Haidilao become a case study at the Harvard Business
School in 2011.
The IPO is expected to price on Sept. 18, with the stock's
trading debut set for Sept. 26.
An undercover news report by a Chinese newspaper exposed a
food hygiene scandal at two of its Beijing restaurants last
year. And one of its outlets in Singapore was suspended for two
weeks earlier this year for violating hygiene standards,
Singapore media reported.
The company acted swiftly after the hygiene issues cropped
up by acknowledging them, and started to offer live streams from
its kitchens in the Chinese capital.
CMB International and Goldman Sachs are the IPO's joint
($1 = 7.8496 Hong Kong dollars)
(Reporting by Julia Fioretti and Julie Zhu; Additional
reporting by Alun John; Editing by Muralikumar Anantharaman)
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