China South Locomotive & Rolling Stock Corp, the country's biggest train maker, said it would launch a roughly $1.3 billion domestic initial public offering on Tuesday.
South Locomotive, which also makes railway equipment, also plans to sell up to 1.6 billion shares in a Hong Kong IPO, or about 13.8 percent of its enlarged share capital, to raise about $600 million, a source with direct knowledge of the deal told Reuters earlier this month.
The China Securities Regulatory Commission (CSRC) approved South Locomotive's Shanghai IPO plan to issue no more than 3 billion new A-shares, it said in a statement filed to the Shanghai Stock Exchange on Monday.
The firm will begin seeking advice on an IPO price from institutional investors in China starting on Tuesday, and plans to fix the indicative price range of the A-share portion of its IPO on August 1. Mainland investors can apply for shares on August 4 and 5.
"After the approval from CSRC, the firm plans to kick off an IPO marketing roadshow for the H-share portion in the next two weeks," a source close to the deal said. Shares in the Hong Kong H-share offering should be priced above those in the A-share sale, even after taking into account the currency difference between the Hong Kong dollar and Chinese yuan, the company has said.
Macquarie Bank and China International Capital Corp are underwriting the Hong Kong portion of the deal. South Locomotive plans to use part of the capital raised to invest in technology and develop high-speed trains. Fund managers expect South Locomotive will benefit from Beijing's massive spending on transport infrastructure, which has struggled to keep up with the country's surging economy.
China, aiming to ease bottlenecks, has earmarked $175 billion for railway infrastructure spending in its five-year plan through 2010. Earlier this year, China Railway Construction Corp raised a combined $5.4 billion in a dual Hong Kong and Shanghai IPO. Its Hong Kong shares trade 11.6 percent above their March IPO price.