October 28, 2019 / 7:27 AM / 16 days ago

UPDATE 1-China baby formula maker Feihe to raise up to $1.14 bln in HK IPO-sources

(Adds deal details and context)

By Julie Zhu and Scott Murdoch

HONG KONG, Oct 28 (Reuters) - China’s largest infant milk formula company, China Feihe Limited, is relaunching its bid to become a publicly listed entity, hoping to raise up to $1.14 billion through an initial public offering in Hong Kong, two people with direct knowledge of the matter said.

The Beijing-based company is selling about 893 million primary shares, or 10% of its enlarged share capital, at an indicative range of HK$7.5 to HK$10 ($0.96-$1.28) a share, the people said.

The price range represents a multiple of 12.2-16.2 times Feihe’s forecast 2020 earnings and gives the firm a market capitalisation of $8.5 billion to $11.4 billion after the IPO, added the people, who declined to be identified as the information was not public yet.

Feihe declined to comment.

The deal is the second attempt at a public listing for Feihe after it backed off of plans for a Hong Kong IPO in 2017. It later pressed ahead with a deal to buy U.S nutritional supplement supplier Vitamin World.

The float also comes against the backdrop of Beijing’s ambitions to make Chinese brands more competitive globally and restore more consumer confidence in domestic formula.

Many Chinese parents switched to foreign brands after a 2008 domestic tainted-milk scandal, when several infants died after the industrial chemical melamine was added to milk powder to raise protein levels.

China aims to increase local production of baby formula so that more than 60% of the market can be supplied domestically, according to a document released by the country’s central planner and several ministries in June. It didn’t say when it expected China to reach that target.

Morgan Stanley-backed Feihe had a 7.3% market share in 2018, taking local and international brands into account, which made it the largest in the country, according to its prospectus filed with the Hong Kong Stock Exchange.

Feihe recorded 10.4 billion yuan in revenue last year, up from 5.9 billion yuan a year earlier. Its full-year 2018 profit was 2.24 billion yuan, compared with 1.16 billion the previous year, the prospectus showed.

Feihe had been listed in New York but was privatised in 2013, mainly by chairman Leng Youbin and Morgan Stanley Private Equity Asia.

Feihe plans to price the Hong Kong IPO on Nov 6 and its shares are due to start trading on Nov 13.

China Construction Bank International, China Merchant Securities and JPMorgan are co-sponsors of the float. (Reporting by Julie Zhu and Scott Murdoch; Editing by Stephen Coates)

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