Ping An Insurance (Group) Co, the country's second largest insurer, yesterday announced pricing details of its plan to sell 1.2 billion A shares and 41.2 billion yuan of convertible bonds, the largest equity refinancing bid in China's capital market.
The issue of up to 1.2 billion A shares, or 14 percent of its expanded capital, will be priced at no less than the stock's average market price over the 20 trading days before the offer is released, or no less than the average price on the previous day, the company said in the statement.
Ping An's A shares shed 10 percent yesterday, closing at 88.39 yuan on concerns the huge refinancing plan could suck up market liquidity. It also played a part in driving down the Shanghai Composite Index 5.14 percent yesterday.
"I believe Ping An's refinancing plan should be a neutral rather than negative message for the company," Wang Xiaogang, an analyst with Shanghai-based Orient Securities, told China Daily. "The detailed influence depends on Ping An's use of the funds raised."
The company said it would use funds raised to invest in mergers and acquisitions (M&As) compatible with its core businesses.
Wang said capital raised from this round of refinancing could make Ping An strong enough to manage M&As both at home and overseas.
"For domestic M&A opportunities, Ping An may prefer taking over medium-scale listed banks and smaller unlisted banks to further strengthen its banking business," Wang said, adding that Ping An will have the purchasing power to acquire two medium-sized listed banks after the refinancing.
Ping An also plans to sell up to 41.2 billion yuan of six-year convertible bonds with detachable warrants.
The combined offer will help Ping An raise as much as 150 billion yuan, based on Ping An's current market price.
That would far exceed the 26 billion yuan raised by Haitong Securities in a share placement last November, and a 30 billion yuan issue of convertible bonds planned by oil refiner Sinopec, which was previously the largest equity refinancing in the pipeline.
"Ping An's move also shows that the company is not so optimistic about the country's capital market this year, so it's choosing to embark on its huge refinancing plan now," said a Shenzhen-based analyst who declined to be named.
Ping An's proposed share and bond sale must still be approved by regulators and a two-thirds majority of shareholders at a meeting scheduled for March 5.
Source:China Daily
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