JD.com firms up health unit spinoff with strong investor demand

Eufemia Didonato

HONG KONG — The health care unit of JD.com, China’s second-largest e-commerce group, is set to raise $3.5 billion in what will be the largest initial public offering in Hong Kong so far this year. JD Health, China’s largest online health care platform, priced the heavily subscribed offering close to […]

HONG KONG — The health care unit of JD.com, China’s second-largest e-commerce group, is set to raise $3.5 billion in what will be the largest initial public offering in Hong Kong so far this year.

JD Health, China’s largest online health care platform, priced the heavily subscribed offering close to the top end of the indicative range of HK$62.80 to HK$70.58 at which it marketed the stock, according to two people familiar with the deal.

If underwriters take up an option to expand the offering by 15%, the fundraising would reach $4 billion, giving the company a market value of $29 billion.

A flurry of deals led by JD Health mean that Hong Kong is set to enjoy its best year for new listings since 2010, based on data compiled by Dealogic. Property manager China Resources Mixc Lifestyle is also set to price its IPO on Tuesday and five other issuers, including Chinese toy maker Pop Mart International Group which is raising over $600 million, close subscriptions this week.

The demand for JD Health shares underscores Hong Kong’s allure as an equity raising destination and provide reassurance for companies with strong fundamentals, bankers said. JD Health is the largest IPO to be held in the city since Ant Group’s plan to raise up to $39.6 billion in a dual listing with Shanghai was canceled at the last minute in November.

Evergrande Property Services, the building management arm of China Evergrande Group, has raised $1.8 billion after pricing its IPO at HK$8.80 a share, near the lower end of its indicated range. The company said on Tuesday its retail offering attracted bids for 10.7 times the shares on offer while the institutional sale collected orders for 3.1 times the available shares, a low multiple for Hong Kong.

JD Health, which is set to make its market debut on Dec. 8, had locked in six cornerstone investors, including Singapore state investment group GIC and U.S. fund management company BlackRock, who put in a combined $1.35 billion.

JD Health generated 87.6% of its revenue in the first half of 2020 from online retail pharmacy and health care services, including consultations, prescription renewal and chronic disease management.

It plans to use 40% of the proceeds for business expansion, 30% for research and development, 20% for potential investment and the remaining for working capital and general corporate purposes.

The company’s revenue for the first six months of the year climbed 76% to 8.78 billion yuan ($1.33 billion), according to its prospectus. Profits excluding the impact of fair value changes of convertible preferred shares and nonrecurring items rose 46% to 370.8 million yuan.

JD.com is also considering a Hong Kong initial public offering next year for its logistics unit that could raise about $5 billion, according to a person familiar with the matter.

Financial services affiliate JD Digits filed a prospectus in September for an IPO on Shanghai’s STAR Market. Progress has been delayed due to regulatory changes that also derailed Ant’s IPO, a person familiar with the deal said.

Companies have raised over $41 billion so far this year from new primary and secondary listings in Hong Kong, according to data from Dealogic, compared with $40.3 billion for all of 2019. This year is set to be the market’s best since 2010, when $55.5 billion was raised in the city. Hong Kong has topped the new listing table globally in seven of the past 11 years.

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