West China Cement issues Conch International HK$1.53bn worth of shares

West China Cement said Friday that it will issue HKD1.53bn (US$197.4m) worth of shares to to Conch International Holding, a wholly owned subsidiary of Anhui Conch Cement Company Ltd.

The Hong Kong-listed company said it would use the proceeds for future acquisitions and investments. At HK$1.69 a piece, the issued shares are at a 0.59 per cent discount to the stock's last closing price. The total amount of shares represent 20 per cent of the company's issued share capital and 16.67 per cent of its enlarged share capital.

The cement company will also issue US$400m worth of 6.5 per cent senior notes due 2019.

Standard & Poor's (S&P's) Ratings Services said that its ratings on WCC are not affected by the company's new equity issuance. “The share issuance will boost WCC's liquidity in the short term, but we  continue to assess its liquidity position as "adequate. In addition, we expect WCC's market share will remain stable over the next 12 months," the rating's agency writes.

S&P further notes that the introduction of Anhui Conch as a shareholder and possible further collaboration between the two companies could potentially moderate the  competition in WCC's core market in Shaanxi Province. However, it will take time for any benefits to materialise, it notes. The share issuance may temper the risk from subdued cement sale prices in the near term, in S&P's opinion.