Jiangsu Yurun Group, one of China's largest meat processing companies, will float on the Hong Kong Stock Exchange on Monday, a move that could greatly enhance its competitiveness, experts say.

The initial public offering (IPO) will raise HK$1.54 billion (US$198 million), the largest offering involving a food and beverage company so far in Hong Kong this year.

Taking private financing into consideration, Yurun is likely to raise over HK$2 billion through the IPO.

Yurun has held roadshows in many big international financial hubs in Asia, Europe and North America, luring a dozen or so famous investors, including Li Ka-shing and Jackie Chan. The value of most of these private share purchases ranges from US$50 million to US$60 million.

According to its prospectus, the Nanjing-based company is offering a total of 416 million H shares. The offer range was set at HK$2.85-HK$ 3.7.

About 10 percent of shares will be sold to public investors and 90 percent will go to international investors, including overseas institutions, corporate and high-value investors.

For the moment, Yurun has been over-subscribed by 156 times in the Hong Kong retailing tranche and by 21 times in the international tranche.

One half of institutional investors come from the United States, and the other half come from Europe and Asia.

Goldman Sachs will hold a stake of 6.75 percent. Another two world leading investors, CDH and GIC, will buy into Yurun, with 3.65 percent and 3.46 percent of shares respectively.

"The participation of world renowned investors will help to greatly boost Yurun's corporate governance, thus making this IPO more attractive," Dong Chen, an analyst with China Securities, told China Daily.

According to Qiao Baijun, an analyst at CITIC Securities, investors' enthusiasm derives from their confidence in China's consumer products sector.

"Given the huge population and low per capita consumption, China's consumer products industry is particularly alluring for investors, and the prospect for brand names are ever more rosy" said Qiao in an interview with China Daily.

"Moreover, Yurun is the trailblazer in low-temperature meat and fresh cold meat products, which are promising products."

As one of China's leading private companies, Yurun has reported robust growth in the past few years.

Statistics show that Yurun earned 169 million yuan (US$20.1million) in profit last year. And its first quarter profit this year topped 94.2 million yuan (US$11.6 million).

According to Zhu Yicai, president of the Yurun Group, the company's net profit will be no less than 335 million yuan (US$41.4 million) this year, doubling the past year's figure. And the dividend will be higher than 25 percent of net profits, largely exceeding investors' demand.

With a controlling stake of 53.47 percent, Willie Holdings headed by Zhu Yicai will be the largest holder of Yurun stock.

(China Daily September 30, 2005)