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Unformatted text preview: November 23, 2007 Why China's IPOs Are Drifting to Europe
Frankfurt Beckons For Firms Looking To Boost Presence
By IAN JOHNSON
November 23, 2007; Page C3 DOW JONES REPRINTS
This copy is for your personal, non commercial use only. To order presentation -ready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit: www.djreprints.com . • See a sample reprint in PDF format . • Order a reprint of this article now . FRANKFURT -- When Chinese garbage company Fujian Fengquan Environmental Protection Co. decided to list its shares overseas, it made what seemed like an odd choice: It chose the German stock exchange Deutsche Börse AG. With China's market booming, prices probably would have been higher back home. And historically, when Chinese companies have done initial public offerings abroad, they have usually chosen New York or London. Fengquan is one of several Chinese companies starting to take advantage of capital markets in continental Europe. In a sign of China's broadening economic relations overseas, these companies are looking to markets such as Frankfurt, the German financial capital, to take advantage of business ties or to boost their brands in Europe. In July, Fengquan listed in Frankfurt as ZhongDe Waste Technology AG, raising $130 million and moving its headquarters to Hamburg, Germany, from the Chinese province of Fujian. This month, Asian Bamboo AG completed its listing on Frankfurt's main exchange, raising $130 million. Vtion Wireless Technology AG announced this week that it is doing a pre-IPO roadshow and expects to raise as much as $150 million. Depending on market conditions, German underwriters expect an additional half dozen to list on the main board next year, too. Even if all these deals come to fruition, Frankfurt and other European exchanges won't soon challenge New York or Hong Kong for dominance in overseas listings of Chinese companies. Europe has less than 1% of the total dollar value of Chinese companies' initial public offerings. About 96% have listed in Hong Kong with the rest in Singapore and New York. Chinese listings in continental Europe are likely to rise as Chinese companies move more aggressively into Europe, where they are slowly starting to penetrate. The listings are supported by a new policy by Deutsche Börse to seek out Chinese companies. The stock-market operator began two years ago to court Chinese companies and support local underwriters, such as Sal. Oppenheim Jr. & Cie., a closely held German investment bank. The Cologne-based firm recently opened an office in Hong Kong and has had a hand in all recent listings. "We think we can get enough companies to create a critical mass in Frankfurt so that investors and analysts pay attention to the companies," said Wolfgang Jensen, Oppenheim's managing director for investment banking. The Chinese companies are taking advantage of IPO growth on European exchanges, which last year had a higher value of IPOs than U.S. markets. Also, some non-U.S. companies have been turned off by the Sarbanes -Oxley Act, which tightens accounting and disclosure requirements for companies listed on U.S. exchanges. Most decisive are specific corporate strategies that call for a strong European presence, which a local IPO can help cultivate. ZhongDe builds small-scale incinerators and relies on Chinese technology, but it hopes to move to larger plants and use imported technology. A listing in Frankfurt allows ZhongDe to recast itself as a Germany -based company and to tap into that country's expertise in environmental technology, said George Lee, head of the company's investor relations. "If we can use German branding and extend our technology into Germany, then we can create value for the company," Mr. Lee said. Likewise, Asian Bamboo wants to use Germany's reputation as a leader in environmental protection to expand its business. The company runs bamboo plantations, using the fast-growing plant for construction and paper. Vtion makes wireless cards for computers and hopes to enter into partnerships with German technology companies. The new companies listing in Frankfurt are placing themselves in the exchange's "Prime Standard" segment, the Deutsche Börse's higher -end listings that are required to have the highest transparency. Mr. Jensen of Oppenheim said doing this give the companies more credibility -- and, they hope, creates more liquidity in their shares. Write to Ian Johnson at email@example.com
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