Detergent maker Blue Moon Group files for US$1 billion Hong Kong IPO

Chad Bray

Blue Moon Group Holdings, the Chinese laundry detergent maker backed by Hillhouse Capital, plans to raise up to US$1 billion in an initial public offering in Hong Kong as soon as the third quarter of this year, according to a person familiar with the discussions.

The Guangzhou-based firm filed a highly redacted offering document on Monday night indicating it planned to proceed with a listing on the Hong Kong Exchange.

The proposed listing is the latest Chinese company to seek a primary or secondary listing in Hong Kong as the bourse fights for the crown as top city for capital raising globally.

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As tensions between Washington and Beijing rose this year, Hong Kong became a destination for some US-listed Chinese companies looking for a listing closer to home amid the heightened rhetoric.

New Economy companies JD.com and NetEase raised more than US$6 billion combined with secondary listings in the city, following a US$12.9 billion secondary listing last year by Alibaba Group Holding, the parent company of the South China Morning Post.

In the first six months of the year, the Hong Kong stock exchange raised US$11.18 billion from 54 IPOs, according to data from Refinitiv, putting it third behind Nasdaq and the Shanghai Stock Exchange in terms of capital raised.

The city also is facing questions about its future status as an international financial centre after Beijing’s top legislative body passed a national security law tailored for the city on Tuesday. The national security law has raised concerns it could be used to stifle free speech and assembly in the city and unnerved some investors.

Despite the tensions, Hong Kong has remained an attractive destination for Chinese companies, such as Blue Moon.

Blue Moon said most of its production was temporarily suspended in January and February of this year as mainland officials ordered lockdowns because of the coronavirus pandemic, but the company has resumed production at all of its facilities.

The company said the coronavirus, which causes the disease Covid-19, presented “challenges to our business and financial conditions”, with first-quarter sales of its fabric care products decreasing over the prior year. It did not give a first-quarter 2020 sales figure in the stock exchange filing.

Blue Moon also said it might have product returns equal to 120 million yuan in 2020 as a result of the pandemic. Some of its e-commerce customers are entitled to return or exchange products if they are unable to sell them within 90 days under the terms of their contract, the company said.

“The reduction in future orders from our sales and distribution partners or returns of slow-moving products could have a material adverse impact on our sales to them and, accordingly, to our business, financial condition, results of operations and prospects,” the company said.

Blue Moon said it might have product returns equal to 120 million yuan in 2020 as a result of the pandemic.

The company said it plans to use proceeds from the offering to expand its production capacity at its four main sites in Guangzhou, Tianjin, Kunshan and Chongqing, raise its brand awareness with celebrity endorsements and sponsorship of television programmes and for strategic mergers and acquisitions.

BofA Securities, CICC and Citigroup are acting as joint sponsors on the offering.

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