ESR Refiles for Hong Kong IPO as Market Recovers

Warburg Pincus-backed warehouse investment platform ESR plans to re-launch an initial public offering in Hong Kong, with the company having filed an updated prospectus with the city’s stock exchange late on Thursday.

ESR, which manages $20.2 billion in assets across Asia Pacific, revived the planned share sale this past week after an earlier attempt was cancelled during June in the face of mass protests of the Hong Kong government’s extradition bill that rocked the Asian financial capital during the same week that shares were due to start trading.

Marketing of the company’s stock to investors is now expected to kick off during the second week of October according to a Reuters report, with sources familiar with the company’s plans indicating that public trading is expected to begin later next month. Representatives of ESR declined to comment on the timetable, size or valuation of the share sale when contacted by Mingtiandi.

While the company has kept details of the rebooted IPO closely guarded­, the earlier attempt had planned to raise as much as $1.24 billion, according to sources who spoke with Mingtiandi at the time, and would have valued the developer and fund manager at around $6 billion.

Death of Extradition Bills Revives IPO Hopes

ESR’s offering revival comes after Hong Kong’s embattled chief executive Carrie Lam had announced earlier this month that she was formally withdrawing a controversial extradition bill which had brought an estimated one million Hong Kongers into the streets in June.

The Hang Seng index, while still down just over 9 percent from its 2019 peak in May, has climbed over 8 percent over the last month. This past week Reuters reported that AB InBev, which canceled a planned $9.8 billion Hong Kong IPO of its Asian operations just days before ESR had ditched its own June plan, would be launching sales of a slimmed down $5 billion offering in Hong Kong as early as next week.

Even at $5 billion, AB InBev’s IPO would be the largest in Hong Kong this year, and ESR’s listing, if kept at the same scale planned in June, would rank as the market’s second-largest offering so far in 2019.

Prospectus Shows Growing Revenues, Profits

Despite the market challenges, ESR’s listing might receive a warmer reception from investors as the company’s financial results for the six months ending in June showed income rising nearly 40 percent from $93.69 million in the first half of 2018 to $155.76 million in the initial six months of this year.

ESR’s net profit for the first half of 2019 amounted to $84 million – up 32 percent from the same period last year, based on revenues of $156 million – an increase of 66 percent over the first six months of 2018, according to the updated prospectus.

Underscoring ESR’s role as both a fund manager and a warehouse builder, 35.3 percent of its income during the first half of 2019 came from renting properties, while 39.7 percent came from fund management. Another 24.2 percent was attributed to construction services and 0.8 percent came from sales of solar energy generated by its facilities, according to the company documentation.

In the new filing, the company said that it expects to use proceeds of the share sale to pay down existing debt and to develop projects within its development pipeline.

Shareholding Stays Steady

The shareholding of ESR remains consistent with its original prospectus filing, with Warburg Pincus holding 38.35 percent of the company. A pair of Warburg Pincus executives, Joseph Gagnon and Jeffrey Perlman, serve as non-executive directors on the company’s board, with Perlman also serving as ESR’s chairman.

Formed by a merger between Shanghai-based E-Shang and the Japan-focused Redwood Group in 2016, Redwood founders Charles de Portes and Stuart Gibson, who also serves as co-CEO of the company with e-Shang co-founder Jeffrey Shen, each hold 13.33 percent of ESR and another 13.33 percent stake belongs to other Redwood entities.

South Korean conglomerate SK Holdings, a logistics unit of mainland e-commerce giant JD.com, Dutch pension fund manager APG and a trust controlled by Jeffrey Shen all hold smaller stakes in the company as it heads into the IPO.