Fosun raises funds as stock price doubles

Fosun is taking advantage of a doubling in its share price this year to raise as much as $1.2bn, which the acquisitive Chinese group says could be spent on future deals.

The group, the largest private conglomerate on the mainland, has spent more than $4bn so far this year on assets including a speciality insurer, a stake in Cirque du Soleil and finalising its takeover of Club Mediterranee, the French holiday group, among others.

Shares in Fosun International, the Hong Kong-listed unit through which most of its deals are done, have been among the best performers in the city this year, gaining 106 per cent before their trading suspension on Monday for the placement.

The new shares, representing 5 per cent of outstanding stock, were offered at a discount of between 3 per cent and 7 per cent to Friday's HK$20.95 close. Fosun plans to sell $1bn worth of stock and could expand the sale by $200m if there is more demand.

Details of Monday's deal seen by the Financial Times indicated the capital-raising was for "general corporate purpose including potential M&A of insurance business."

More than a third of Fosun's assets are already invested in insurance. Guo Guangchang, Fosun's founder and chairman, is a known admirer of the business model pursued by Warren Buffett, where an insurance group provides a foundation and much of the funding for other deals.

Last year Fosun bought Fidelidade, Portugal's largest insurer, for $1.5bn and later agreed to buy US insurer Meadowbrook for $433m. Last week it agreed to purchase the 80 per cent it did not already own in Ironshore, a Bermuda-based speciality property and casualty insurer, for $1.8bn.

In total, the group spent almost $26bn on deals last year, according to Dealogic data.

Fosun is only the latest Chinese group to take advantage of investor interest in mainland-based companies to raise fresh capital. Last month China Galaxy Securities tapped investors for $3.1bn, while last week China Taiping Insurance raised $1.7bn.

More such deals are expected even after stocks in Shanghai last week suffered their worst three-day fall in almost three years.

An interest rate cut, announced by the People's Bank of China late on Sunday, buoyed the market mood on Monday.

The Shanghai Composite is still up about 70 per cent in the past six months while Hong Kong's Hang Seng has added 17 per cent, mostly in the past six weeks.

Fosun is Hong Kong's third best-performing Chinese large-cap stock this year, behind Hanergy Thin Film Power's 150 per cent gain and Evergrande Real Estate's 125 per cent rally.

Citigroup, Morgan Stanley, UBS, Goldman Sachs, Hani Securities, and China Merchant Bank International worked on the Fosun deal.

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