Tencent floating online publisher on HK bourse to raise up to $1.1b

Some Tencent mascots. The Chinese investment company has filed for a Hong Kong initial public offering for its e-book unit.
Some Tencent mascots. The Chinese investment company has filed for a Hong Kong initial public offering for its e-book unit.PHOTO: REUTERS

Deal seen as boost for exchange which has failed to draw large volume of tech IPOs

HONG KONG • China Literature, a Tencent Holdings unit and the country's largest online publishing and e-book company, has filed for a Hong Kong initial public offering that is expected to raise as much as US$800 million (S$1.1 billion).

The deal is a boost for the Hong Kong bourse, which has failed to attract a significant volume of technology deals despite being the world's top destination for new listings last year.

The company, which is looking to raise funds for potential acquisitions and expand its mobile reading business, has hired Bank of America Merrill Lynch, Credit Suisse and Morgan Stanley as sponsors of the offering, it said in a filing late on Monday.

Although the structure of the deal was not disclosed, Tencent has said it plans to hold at least 50 per cent of China Literature after the spin-off and that the offering will consist of 15 per cent of the firm's enlarged share capital.

China Literature has a business akin to Amazon's Kindle Store, operating a platform with 8.4 million works from 5.3 million writers.

The firm saw revenues jump 59 per cent last year to 2.6 billion yuan (S$529 million), while it posted a net profit of 30.4 million yuan, compared with a loss of 354.2 million yuan a year earlier.

Fundraising by tech firms in Hong Kong accounted for an average 2.5 per cent of all IPOs since the global financial crisis in 2008.

It is its first net profit since it began disclosing financial data in 2014.

Tencent started its online reading business in 2004 and it grew after the acquisition of Cloudary in 2014 for US$729.6 million.

Tencent controls China Literature with a 62 per cent stake. Private equity firm Carlyle Group owns 12.2 per cent while Trustbridge Partners, a private equity firm founded by Mr Shujun Li, the former CFO of Shanda Interactive, holds 6 per cent.

Fund raising by tech firms in Hong Kong accounted for an average 2.5 per cent of all IPOs since the global financial crisis in 2008, Thomson Reuters data shows.

Meanwhile, Tencent began limiting daily playing times on its smartphone smash hit King Of Glory yesterday to "ensure children's healthy development", as the state- owned People's Daily criticised the game as an example of how addictive games spread "negative energy" and have even led to deaths.

The self-developed Honour Of Kings has grown into a money-spinner, a consistent chart-topper on Apple and Google app charts that is expected to account for more than half of Tencent's smartphone gaming revenue this year.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 05, 2017, with the headline 'Tencent floating online publisher on HK bourse to raise up to $1.1b'. Print Edition | Subscribe