China's Xiaomi eyes up to $4 billion in stock, convertible bonds offering

China’s No. 2 smartphone maker Xiaomi Corp. is seeking to raise as much as $4 billion from a combined share placement and sale of convertible bonds, adding to a war chest aimed at expanding its market share from competitor Huawei Technologies Co.

Xiaomi is selling 1 billion shares in a top-up placement to raise as much as $3.2 billion, according to terms of the deal obtained by Bloomberg News. The shares are being offered at HK$23.70 to HK$24.50 each, representing a 6.3% to 9.4% discount to its closing price of HK$26.15 on Monday. It’s Hong Kong’s largest top-up placement on record, data compiled by Bloomberg show.

Xiaomi is also seeking $855 million through a seven-year, zero-coupon convertible bond, the terms show. The conversion premium is set at 42.5% to 52.5% above the reference share price, which will be the offering price of the equity placement.

Xiaomi shares had been on a rally this year, rising 146% from a year ago. However its stock slipped after it disclosed that its internet services revenue had grown at its slowest pace in three years in the September quarter. It grabbed market share from Huawei when American sanctions deepened particularly in overseas markets from Europe to India.

The proceeds from the equity placement will be used for business expansion, investments to increase market share and strategic ecosystem investments, the terms showed.

Credit Suisse Group AG, Goldman Sachs Group Inc, JPMorgan Chase & Co. and Morgan Stanley are arranging Xiaomi’s offering.