China Southern Airlines is to become the largest mainland Chinese carrier yet to float its shares publicly, with a dual listing on the New York and Hong Kong exchanges.
The Guangzhou-based airline is to make an initial public offer of around 32% of its stock at the end of July. Analysts anticipate that the float will raise more than $500 million, at least double that generated by China Eastern Airlines dual listing in early February.
Around one-third of the shares are due to be sold in the USA, with another small parcel listed on the Hong Kong exchange. More than half of the stock on offer will be placed with international corporate investors by the lead merchant bank Goldman Sachs, which will itself take a further small stake representing around 1% of the airline.
Corporate investors include Hong Kong-based Hutchison Wampoa and parent company Cheung Kong, which will each take a 3% holding.
If demand is strong, China Southern may issue further shares to bring the total on offer to 35%, the maximum foreign holding permitted under Chinese law, as was the case with China Eastern. Hainan Airline also launched on the Shanghai exchange only weeks before (Flight International, 9-15 July, P20).
The airline says that it plans to use $283million of the capital raised to underwrite new aircraft and equipment purchases. Another $164 million will go towards reducing its $2.3billion debt, $50million is to go on new airport equipment, $12million for a new flight-training simulator for its Zhuhai centre and $9 million on a computerised finance system.
China Southern is the country's most profitable airline, recording a net profit of Y727million ($88million) in 1996, and analysts expect to be heavily oversubscribed.
"Chinese airlines have a growth opportunity that no other airlines possess. There is phenomenal growth potential with new traffic in China and they are still operating in a regulated domestic market. China Southern should do quite nicely," says a Hong Kong based aviation analyst.
Source: Flight International
