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ESR Cayman increases size of Hong Kong IPO to $1.6 billion - sources

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By Scott Murdoch

(Reuters) – Property investor ESR Cayman <1821.HK> is exercising a 15% “upsize” option that will lift its Hong Kong initial public offering (IPO) to $1.6 billion, according to two sources, in what will be the city’s second biggest float this year.

Would-be investors have also been told the deal will be priced at HK$16.80 a share – the mid point of the initial range of between HK$16.20 to HK$17.40 – according to the sources who could not be identified because the information has not yet been made public.

Warburg Pincus-backed ESR is due to formally set the final price of the deal on Friday night in New York.

The extra shares in the “upsize” option come from existing shareholders, meaning 63% of all the shares being sold are from existing investors, and just 37% of the deal – or $600 million – will be fresh money for the company.

ESR could not be reached immediately for comment.

The company this week relaunched its IPO following a failed attempt in June that would have been worth up to $1.24 billion.

At the time ESR, which manages a range of property-focused funds and its own property investments, cited market conditions as the reason for pulling the deal.

In the current offering, Canadian pension fund Ontario Municipal Employees Retirement System (OMERS) has been named as a cornerstone investor, with its $585 million investment worth 37% of the deal and 9% of the company’s share capital following the float.

A term sheet for the deal, seen by Reuters, said that the company would use the majority of the funds raised to pay down debt with the remainder spent on developing its existing portfolio and increasing its co-investments.

(Reporting by Scott Murdoch; Editing by Muralikumar Anantharaman)

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