Chinese specialty chemicals company Chemspec International
Ltd.'s initial public offering of 8 million American depository
shares priced at $9 per ADS Tuesday, within the expected per-share
price range of $7 to $9.
The company will offer 6.33 million ADSs, and some shareholders
will offer 1.76 million ADSs, according to an amended prospectus
filed with the Securities and Exchange Commission. Each ADS
represents 60 ordinary shares, the filing said.
Several analysts said demand from investors appears strong for
Chemspec's ADSs, expected to trade on the New York Stock Exchange
under the symbol CPC. However, Morningstar panned the deal as
"toxic," given growing competition, soft end-markets, and
related-party transactions between the company and its founder,
among other criticisms.
Chemspec is one of four companies expected to launch initial
public offerings this week; the others are Medidata Solutions Inc.,
Duoyuan Global Water Inc. and Invesco Mortgage Capital Inc. If all
are completed, it would be the most active week for IPO issuance in
the U.S. since May 2008.
Chemspec plans to use about $45 million of the proceeds to
expand its manufacturing capacity and for acquisitions and other
general corporate purposes.
The Shanghai-based company bills itself as the largest
manufacturer of fluorinated specialty chemicals in China, based on
sales. Its chemicals are used in a variety of industries, including
electronics and pharmaceuticals.
Established in 1996, Chemspec counts Eli Lilly & Co. (LLY)
and Merck KGaA (MKGAF) among its customers. Sales and profit have
been growing steadily, although income tax expenses dragged the
company's first-quarter profit 38% below a year earlier, when it
booked income tax gains.
Chemspec has suffered from the drop in demand for electronic
devices, though sales of chemicals for the pharmaceutical and
agrochemical industries more than compensated for a slowdown on the
electronics side in the first quarter, when sales grew 23% to $29
million.
The company is expanding its manufacturing capacity, which is
expected to double from its first-quarter level by the end of this
year and nearly quadruple through the end of 2011.
The company's outlook is upbeat; it believes demand for
specialty chemicals has been recovering and will grow later this
year, particularly closer to the holiday season.
Underwriters Credit Suisse Group (CS), Citigroup Inc. (C),
Oppenheimer & Co. and Piper Jaffray Cos. (PJC) have an option
to purchase up to 1.22 million more ADSs to cover
overallotments.
-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975;
Kathy.Shwiff@dowjones.com
(Lynn Cowan contributed to this report.)