NEC's China JV Eyes $300 mln HK IPO This Year

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SHANGHAI/HONG KONG: Hua Hong NEC Electronics Co., a Chinese joint venture of Japan's NEC Corp., is relaunching a planned Hong Kong IPO this year to raise at least $300 million to expand production, sources familiar with the situation said on Tuesday.
Shanghai-based Hua Hong NEC, in which founding shareholder NEC has a nearly 20 percent stake,[link widoczny dla zalogowanych], had planned to list in Hong Kong as early as 2004 but delayed its initial public offering at least twice,[link widoczny dla zalogowanych], due mainly to market conditions,[link widoczny dla zalogowanych], the sources said.
Hua Hong NEC, one of China's biggest chip makers, has hired investment bank BNP Paribas as its IPO sponsor and accounting firm PricewaterhouseCoopers as its auditor, said the sources.
"Hua Hong has met the financial criteria for a Hong Kong listing this year," said one source in Shanghai.
"All the board members of the company have agreed with the plan that Hua Hong should list in Hong Kong as soon as it can,[link widoczny dla zalogowanych]," said the source.
Another source in Hong Kong said Hua Hong NEC was expected to raise at least $300 million through the proposed IPO this year.
"If Hua Hong can get $500 million or something, it would be better as the company really needs a lot of money to improve its product line and build new plants," the Shanghai source said.
BNP declined to comment, while Hua Hong NEC was not immediately available for comment.
RED-CHIP
State-owned Hua Hong Group is the controlling shareholder of Hua Hong NEC with a more than 60 percent stake,[link widoczny dla zalogowanych], while Shanghai Belling Co. Ltd. a joint venture of Alcatel-Lucent holds 11.2 percent of Hua Hong NEC.
Other big shareholders include U.S. technology firm Jazz Semiconductor Inc., which bought 11.3 percent in 2003.
Hua Hong NEC had been planning a $200-$300 million IPO in late 2004, but scrapped the deal after the highly cyclical semiconductor industry went into a downturn, the sources said.
China now accounts for over one-fifth of global demand for integrated circuits (IC), driven by local consumption and manufacturing outsourcing to the region, according to UBS.
Domestic market demand for chip products is expected to rise rapidly over the next few years, partly because sales of audio-visual and home appliances are likely to increase in China, where annual economic growth has been kept around 10 percent in the past few years, analysts say.
To support business expansion of Hua Hong NEC, the Beijing-based State-owned Assets Supervision and Administration Commission (SASAC) had given approval to Hua Hong NEC to list in Hong Kong as a red-chip stock, the sources said.
A red-chip firm is a Hong Kong-listed and incorporated company backed by mainland China.
Hua Hong NEC once considered a U.S. listing, but Beijing was believed to prefer listing its high technology companies domestically or in Hong Kong, said the Shanghai source.
Hua Hong NEC's bigger domestic rivals include Semiconductor Manufacturing International Corp. (SMIC) and Grace Semiconductor Manufacturing Corp.
On Tuesday, Grace Semiconductor's Chief Executive, Daniel Wang, told Reuters that the Taiwan company was eyeing a listing to raise capital for business expansion, though he declined to give a timeframe.

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