Shenhua seeks BHP, Rio investment

China's largest coal producer was in talks to sell shares to global miners BHP Billiton Ltd. and Rio Tinto Plc as part of plans for a roughly US$3 billion initial public offering (IPO), people familiar with the situation said.

China Shenhua Energy, whose IPO would be the biggest overseas mainland deal since late 2003, may also tap investment from wealthy Hong Kong businessmen, the sources said.

Tycoons such as Li Ka-shing, who heads Cheung Kong and Hutchison Whampoa, and Henderson Land Development chairman Lee Shau kee have a tradition of supporting big State IPOs.

"Shenhua is talking to several potential strategic investors, but at this stage nothing is fixed," one of the sources said.

Another source said the company aimed to attract five or six strategic investors, including miners and financial partners.

Clinton Dines, president of BHP Billiton China, declined comment. BHP is the world's biggest miner.

Conita Hung, head of research at Delta Asia Financial in Hong Kong, said Shenhua would benefit if global miners invested in the company and shared their expertise in safety and technology.

Shenhua planned to launch its IPO in late May in what would be the first simultaneous listing by a company in Hong Kong and Shanghai, although if the mainland markets remained weak the company would only list overseas, a source said recently.

Its IPO would be the biggest from the mainland since China Life Insurance Co. Ltd. raised US$3.5 billion in December 2003.

Shenhua obtained listing approval from the China Securities Regulatory Commission to sell 18 percent of its capital to overseas and Hong Kong investors and another 7 percent to domestic investors. A listing hearing with Hong Kong regulators is set for April 20.

Source: Shenzhen Daily/Agencies