* Had offered 1.04 bln shares at fixed price of HK$15.84
* Narrow discount to Shanghai stock price hurt retail demand
(Adds analyst comment, underwriting fees)
HONG KONG, April 3 (Reuters) - Guotai Junan Securities Co
Ltd, China's third-largest brokerage by assets,
raised $2.1 billion in a rare fixed-price share offering that
was the biggest stock sale in Hong Kong in six months, a source
with direct knowledge of the deal said on Monday.
The Shanghai-listed company offered 1.04 billion new shares
at a fixed price of HK$15.84 each, putting the total deal at
HK$16.5 billion ($2.12 billion). Guotai Junan's deal was the
largest stock sale in the city since the $7.63 billion IPO of
Postal Savings Bank of China in September.
Concerns over volatility in China's equity markets and a
smaller-than-expected discount to the price of its
Shanghai-listed stock curtailed demand for the deal,
particularly from retail investors, analysts said. Those mom and
pop investors have a significant influence over first-day
trading in Hong Kong share offerings.
The shares were originally offered at a discount of 25
percent to Guotai Junan's closing price in Shanghai on March 24,
but a decline in the shares last week narrowed that discount to
about 23 percent.
"There wasn't much demand from the retail investors," said
Jasper Chan, assistant manager of corporate finance at Hong Kong
brokerage Phillip Securities, which offers margin loans for
retail investors to buy into share offerings in the city. "The
discount was not quite attractive and the market sentiment is
not good at the moment."
A fixed-price share offering is unusual, with most deals
setting an indicative range before deciding on the final
pricing, depending on demand.
Guotai Junan did not immediately respond to a Reuters
request for comment on the share sale.
The company plans to use 30 percent of the share sale
proceeds to develop its prime broking and lending business for
institutional clients and another 30 percent to open new retail
branches and launch financial technology (Fintech) services, it
said in the prospectus for the sale.
The remainder will be used to expand its asset management
and overseas businesses, including potential joint ventures with
Guotai Junan secured $598 million in commitments from
cornerstone investors for the share sale, including $388 million
from private equity firm Apax Partners and $100 million from
real estate investment firm Winland Group.
The shares will debut in Hong Kong on April 11.
Bank of America Merrill Lynch, Goldman Sachs, Shanghai
Pudong Development Bank International and Guotai Junan's Hong
Kong investment-banking arm - Guotai Junan International
- acted as joint sponsors for the deal.
Guotai Junan also hired another 16 banks as joint
bookrunners for the deal. The banks stand to jointly earn $42
million in fees, equivalent to a 2 percent underwriting
($1 = 7.7715 Hong Kong dollars)
(Reporting by Elzio Barreto; Editing by Stephen Coates and