SHANGHAI â€" The Poly Culture Group Corporation, which operates one of China’s biggest art and auction houses, raised $331 million in an initial public offering in Hong Kong on Friday, according to people close to the deal.
The offering bolstered the prospects of Poly Culture’s auction business in China, the world’s fastest-growing art market, and allows the state-backed company to expand its cinema, theater and performance hall operations.
Poly Culture, which is based in Beijing, sold more than 70 million shares to the public, pricing them at 33 Hong Kong dollars, or $4.25, per share, the top of the range set by the company’s bankers, indicating strong investor demand. Shares in the company will begin trading in Hong Kong next week.
Poly Culture is controlled by the China Poly Group Corporation, a huge, state-run conglomerate that began more than 20 years ago by selling weapons to the People’s Liberation Army. In addition to military equipment, the group has diversified into sectors including property and resources. Last year, the United States imposed sanctions on an affiliate, Poly Technologies, accusing it of having violated a nonproliferation policy that controls weapons traffic with Iran, Syria and North Korea.
The Poly Group moved into the art and auction business in 2005 with the establishment of Poly Auction, now the world’s third-largest auction house after Christie’s and Sotheby’s, and the main unit of Poly Culture.
In China’s fast-growing art and auction market, Poly Culture is contending with the China Guardian auction house, which was founded in the 1990s. The two companies have profited in recent years from soaring demand for Chinese antiquities, calligraphy, scrolls and contemporary Chinese art. The Beijing-based Guardian, which is privately held, is expanding quickly with plans for new headquarters in central Beijing, a museum and a possible I.P.O.
The rapid growth of Poly Culture’s auction arm has been driven by the boom, with record prices for works by modern artists like Xu Beihong and Qi Baishi.
But China’s art market has been racked with fraud, forgery and bribery, and it saw a sharp decline in 2012 before recovering somewhat last year. Auction houses have also been troubled by wealthy collectors who place winning bids for art works but then delay or fail to pay after the auction is completed. Executives at Poly and Guardian say that they have struggled to improve conditions and verify the authenticity of works, and that they are trying to improve their operations to compete with Christie’s and Sotheby’s, which have also entered the Chinese market.
According to Artron, a Chinese website for art news, Poly Auction was the biggest Chinese auction house in 2012, with about $1 billion in turnover, including sales made in Hong Kong.
Citic Securities and CLSA were the lead bankers on the company’s initial public offering in Hong Kong.
