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China Nepstar Chain Drugstore Ltd. (NYSE: NPD) on Friday filed the terms of its upcoming IPO with the SEC. According to the filing, Nepstar will be offering 20,625,000 American Depositary Shares [ADS] with an initial public offering price per ADS between US$11.50 and US$13.50. Each ADS will represent 2 ordinary shares of Nepstar. The offering is expected to bring in as much as US$278 million.

Nepstar has 1,791 directly operated drugstores located in 62 cities in China. The company states that it is the largest retail drugstore chain in China based on the number of directly operated stores, and that it had the highest revenue among all directly operated retail drugstore chains in China in 2004, 2005 and 2006. With FY 2006 revenues of US$227.6 million, the company reports its revenue CAGR from 2004 to 2006 was 43.4%. For the six months ending June 30, 2007 the company had revenues of US$124.3 million, an 18.4% increase over the same period last year.

The company plans to use proceeds from the IPO to fuel its continuing growth and will spend:

  • approximately US$52.0 million to open new stores;
  • approximately US$11.0 million to upgrade our information management and inventory control system;
  • approximately US$27.0 million to set up two new distribution centers;

The remaining portion is for other general corporate purposes and for potential acquisitions of retail drugstore chains or independently operated drugstores. Nepstar specifically plans to grow in cities such as Beijing and Shanghai through acquisitions.

Goldman Sachs (Asia) LLC (NYSE: GS) is lead underwriter on the offering. It is reported that Goldman has invested up to US$40 million in Nepstar, and holds 50 million ordinary shares. The IPO filing indicates that this position may be worth as much as US$338 million. The date of the offering has not been publically released. This IPO has the potential to be one of the most attractive offerings of 2007.

Disclosure: Author is long GS

Source: China Nepstar Files Terms of Upcoming NYSE IPO