China South Locomotive & Rolling Stock Corp, the country's biggest train maker, said it would launch an initial public offering (IPO) worth about $1.3 billion in Shanghai.

South Locomotive, which also makes railway equipment, plans to sell up to 1.6 billion shares in a Hong Kong IPO as well, or about 13.8 percent of its enlarged share capital, to raise about $600 million, a source privy to the deal said earlier this month.

The China Securities Regulatory Commission (CSRC) approved South Locomotive's Shanghai IPO plan to issue no more than 3 billion new A-shares, it said in a statement filed to the Shanghai Stock Exchange yesterday.

The firm will begin seeking advice on an IPO price from institutional investors on Tuesday, and plans to fix the indicative price range of the A-share portion of its IPO on Aug 1.

Mainland investors can apply for shares on Aug 4 and 5.

"After the approval from CSRC, the firm plans to kick off an IPO marketing roadshow for the H-share portion in the next two weeks," a source close to the deal said.

Shares in the Hong Kong H-share offering should be priced above those in the A-share sale, even after taking into account the currency difference between the Hong Kong dollar and the yuan, the company has said.

South Locomotive plans to use part of the capital raised to invest in technology and develop high-speed trains.

Fund managers expect South Locomotive will benefit from Beijing's massive spending on transport infrastructure, which has struggled to keep up with the country's surging economy.

China, aiming to ease bottlenecks, has earmarked $175 billion for railway infrastructure spending in its five-year plan through 2010.

The combined Hong Kong and Shanghai offering may be the largest IPO in the nation since a similar sale by China Railway Construction Corp between February and March that raised $5.4 billion in a dual listing. The company's Hong Kong shares traded 11.7 percent above their March IPO price, closing at HK$11.9 yesterday.

China International Capital Corp and Industrial Securities Co are managing South Locomotive's Shanghai share sales. CICC and Macquarie Group Ltd are arranging the Hong Kong offering.

Agencies

(HK Edition 07/29/2008 page3)