Author: Gordon Platt
China Netcom’s IPO Raises $1.2 Billion

China Netcom, China’s second-biggest fixed-line phone company, raised $1.2 billion in an initial public offering of shares in Hong Kong and American depositary receipts in New York.

The company plans to spend half of the net proceeds from the sale for expansion and Internet infrastructure. It provides telecom services in China’s northern provinces and is expanding into the lucrative areas of Shanghai and Guangdong, which are now served primarily by China Telecom.

China International Capital, Citigroup and Goldman Sachs arranged the sale, which included 47 million ADRs, each worth 20 common shares.

Citigroup Depositary Receipt Services is the sponsor and depositary for the ADR program, which is listed on the New York Stock Exchange.

China Netcom is a leading international data communications operator in the Asia-Pacific region. The issue was the third-largest China-based IPO of 2004.

Ninetowns Digital World Trade Holdings, a Beijing-based developer of software designed to streamline the import-export business in China, launched an ADR program in December 2004, with JPMorgan Chase as depositary.

The ADRs were issued in conjunction with Ninetowns’ $106 million IPO, the latest is a series of China-based IPOs on Nasdaq. Earlier issues in 2004 included recruitment firm 51Job, online gaming company Shanda Interactive and financial information provider China Finance Online.

JPMorgan, Citigroup, Lehman Brothers and Jefferies underwrote the Ninetowns offering.

Bank of New York established a Level I ADR program for ChinaCast Communications, which provides satellite-based broadband Internet services to educational institutions, government agencies and companies. ChinaCast is one of the first to have entered the distance-learning market in China.

While Asian issuers raised the bulk of equity capital in 2004, the top-performing US exchange-listed DRs were mainly from Northern Europe.

Ispat International, the Netherlands-based steel producer that uses the integrated mini-mill process, posted a gain of more than 325% in its share price between January 1, 2004, and December 9, 2004.

Ireland-based pharmaceutical company Elan was second with a gain of 306%.

The Netherlands, Denmark and Norway each had two companies among the top 10 performers last year, according to data through December 9.

There were no Asian issuers among the leaders, but Latin American companies took two of the top 10 positions. Brazilian food company Perdigao was seventh, with a rise of 122%, and Bancolombia’s preferred shares gained 110% to take the number nine spot.

Gordon Platt