Advised by five firms on different jurisdictions, Joyou AG, designer and producer of household sanitary products, has become the first Chinese company to list on the Deutsche Börse (Frankfurt Stock Exchange) this year.

Working closely with experts from its Shanghai office, CMS Hasche Sigle advised the issuer via an international team. The firm previously also provided support for all the major floatations of Chinese companies on the Frankfurt Stock Exchange, advising ZhongDe Waste Technology AG and Asian Bamboo AG in 2007, followed by Vtion Wireless Technology AG in 2009.

Underwriters for Asian Bamboo and ZhongDe Waste listings were also advised by Dewey partners.

“The complexity of the matter mainly lay in the restructuring part because the restructuring should only occur if and when it was certain that the IPO would be successful. The issuance of the shares in the German AG to PE investors therefore had to happen at the very last stage of the process together with the issuance of shares to investors subscribing for new shares in the German AG in the IPO. This required a strong focus on process management,” said Philipp Melzer, partner who led the CMS team on the transaction.

Joyou’s largest independent shareholder, China Renaissance Capital Investment (CRCI), was advised by Zhong Lun partner Zhao Jing and Freshfields partner Heiner Braun. Braun encounters similar challenges to that of Melzer, “The deal involved complex restructuring of shareholder base because our client was originally invested at Hong Kong level and had to swap its shareholding up to German holdco level,” he said.

Listing overseas has become increasingly popular for Chinese companies. In 2009, despite the financial crisis, over US$54bn in total capital was raised overseas by Chinese companies, an increase of 150% from 2008.

Deutsche Börse wiser choice for SMEs
Despite the sustained interest in Hong Kong and US listings, the Deutsche Börse could potentially seize an increasing market share in its aggressive push to obtain new Chinese listings. In 2007, the Deutsche Börse and the China Securities Index Company (CSI), a JV between the Shanghai Stock Exchange and the Shenzhen Stock Exchange, signed a sales cooperation agreement. Under the terms of the agreement, the Deutsche Börse acts as an exclusive sales partner for the CSI300 Index license of the ETF issuer in Europe.

Since its collaboration, the Deutsche Börse has stated that Frankfurt is the most attractive location for small and medium-sized enterprises (SMEs) seeking listings outside of China since the cost of going public on the Over-The-Counter Bulletin Board (OTCBB) in the US is on par to going public on the Frankfurt Stock Exchange. The Deutsche Börse listings are tailored to SMEs as it takes €100,000 to go public in the US and the UK, but a Deutsche Börse listing only requires application fees ranging from €750 to €5,500.

“The IPO process of Joyou was closely monitored by a number of other Chinese companies interested in going public in Germany. As the IPO of Joyou has been successful we expect these companies to kick-off similar IPO projects shortly,” said Melzer.

So far, a total of 15 mainland enterprises have listed on the Deutsche Börse, including companies in information technology, environmental protection, information technology and real estate.

*Macquarie Capital and China International Capital Corporation Hong Kong Securities acted as joint global coordinators and joint bookrunners. WestLB AG and DZ BANK AG acted as co-lead managers.

Chinese companies listed on the Frankfurt Stock Exchange