Hon Hai’s FII becomes strategic partner with Chinese Internet giants

Taipei, Foxconn Industrial Internet Co. Ltd. (FII), an Internet-focused subsidiary of Taiwan-based manufacturing giant Hon Hai Precision Industry Co., has formed a strategic partnership with three Chinese Internet giants.

FII, which is set to launch an initial public offering (IPO) on the Shanghai Stock Exchange soon, has completed the placement of part of its shares with several Chinese strategic partners.

Among those partners are e-commerce operator Alibaba Group Holding Ltd., search engine Baidu Inc. and online services provider Tencent Holdings Ltd.

With their huge influence in China's Internet market, Alibaba, Baidu and Tencent are referred to as the "ABC" Internet giants.

According to FII, each of the three companies has pledged to buy about 21.79 million FII shares with a lock-up period of three years.

FII has set its IPO price at 13.77 Chinese yuan (US$2.05) so the three companies are expected to each spend about 300 million yuan to become shareholders in the Hon Hai subsidiary.

FII said a total of 20 prominent Chinese enterprises secured shares through the placement with a private equity fund owned by state-run State Development & Investment Corp. securing 72.55 million shares to become the largest strategic partner by investing almost 1 billion yuan in the Hon Hai subsidiary.

The 20 Chinese enterprises are expected to buy an aggregate of 59.08 million FII shares through investments in different lock-up periods, the Hon Hai unit said.

The FII application for the IPO was submitted Feb. 1 to the CSRC. The listing review committee of the CSRC processed the application March 8 and immediately gave approval, catching the market off-guard, as the processing period in China usually takes about a year. However, the entire review process for FII took the CSRC just 36 days.

The quick review of FII's IPO application is believed to indicate China's plan to lure high-tech firms as it prepares to develop its technology and innovation sector, dealers said.

FII is expected to raise about 27.11 billion yuan from the IPO by selling 1.969 billion shares, which will be the largest IPO in almost three years in China.

After the IPO, Hon Hai, also known as Foxconn in the global market, will retain about an 85 percent stake in FII.

FII's investment in China will focus on a wide range of new technologies, such as cloud-based computing, high performance computing, 5G Internet communication solutions for industry, data centers and smartphone-related applications, Hon Hai said.

Hon Hai added that the listing in Shanghai will allow FII to tap the rapid growth of Internet communication and cloud-based computing business in China, and that proceeds from the IPO will be invested to expand its Internet business there.

The company's prospectus shows that its major clients include Amazon, Apple Inc., Dell Inc., U.K.-based telecom equipment provider Arris International Plc., Chinese smartphone brand Huawei Technologies Co. and PC vendor Lenovo Group Ltd.

The top five clients accounted for more than 70 percent of FII's revenue, according to the prospectus.

Source: Focus Taiwan News Channel