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China's NetEase targets global expansion with $2.6 billion HK listing


By Julie Zhu, Kane Wu and Scott Murdoch

HONG KONG (Reuters) - Chinese online gaming firm NetEase plans to raise about $2.6 billion to fund expansion through its secondary listing which began on Monday, a term sheet seen by Reuters showed, marking Hong Kong's largest equity deal so far this year.

Nasdaq-listed NetEase's paperless offering is expected to be one of several large secondary deals in Hong Kong this year, after Washington questioned whether Chinese companies should be able to list in New York as tensions with Beijing rise.

According to the term sheet, NetEase plans to sell 171.48 million primary shares in the float, 5.15 million shares or 3% of which will be sold to retail investors. It has set a maximum price of HK$126 ($16.26) for the retail tranche.

It will become only the second company to launch a secondary listing in Hong Kong, following Alibaba in 2019, under a rule change that finally allowed U.S.-listed Chinese groups to offer such shares in the city.

NetEase plans to price the offering on Friday when books close to investors, with the shares set to start trading on June 11. The proceeds are earmarked mainly for expansion overseas as well as pursuing innovation.

In filings to the Hong Kong Stock Exchange, NetEase said one potential risk for investors was proposed U.S. legislation that could force some Chinese companies to delist if their auditor had failed to comply with U.S. audit oversight for three years.

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NetEase's deal will be Hong Kong's largest listing so far in 2020, Refinitiv data shows, and one of the largest globally, depending on its final size.

JD.com is expected to follow NetEase, with plans to list on June 18 and could raise about $3 billion by selling down about 5% of its shares, Reuters has reported..

The Hong Kong activity comes as markets pick up globally.

Coffee maker JDE Peet raised 2.25 billion euros ($2.5 billion) in its Amsterdam debut on Friday, while Warner Music is due to price its offering of up to $1.8 billion in New York on Tuesday.

Asia saw the largest deals in the early part of the year, with Beijing-Shanghai High Speed Railway raising $4.4 billion in China early in January and Thailand's Central Retail some $2.52 billion in February in Bangkok.

Firms have raised $36.9 billion in IPOs so far this year, down 32.1% from the same period in 2019, Refinitiv data showed.

($1 = 7.7514 Hong Kong dollars)

(Reporting by Scott Murdoch, Kane Wu and Julie Zhu; Editing by Jennifer Hughes, William Mallard and Alexander Smith)

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