WH Group defends remuneration plan for two top executives
Pork processor says fast sales growth justifies US$681m remuneration to two top executives
WH Group, the world's largest pork processor formerly known as Shuanghui International, believes its exponential sales growth justifies a US$681 million share-based compensation plan for two senior executives in the run-up to its HK$41 billion initial public offering.
"Our sales have risen 20 per cent annually for 20 years and the market capitalisation of Henan Shuanghui Investment & Development has jumped to about 100 billion yuan [HK$125.6 billion] from two billion yuan at the time of listing," said WH chief financial officer Guo Lijun yesterday. "We are confident we'll continue to achieve fast growth."
Guo, a former executive vice-president of Shuanghui Investment, Asia's largest meat company, said the remuneration programme would not cause any operational or financial problems after the listing.
The company, which made headlines after the US$4.7 billion acquisition of Smithfield Foods last year, issued 573.1 million new shares to WH chairman Wan Long and 245.6 million to vice-president Yang Zhijun, which translated into a combined cost of US$681 million to be marked as expenses for 2012 and 2013.
Dubbed the "godfather of pork" on the mainland, Wan became the meat processor's factory manager in 1994, about five years after the Shuanghui brand was created and is credited with the company's rapid rise.
Yang, a key adviser to Wan, is in charge of the group's merger and acquisition strategy.
Wan previously said he would consider retiring after sales revenue at WH reached 100 billion yuan.
The company is selling 3.65 billion shares, of which 80 per cent are new ones, at an indicative range of HK$8 to HK$11.25 each, with an option to issue a further 731 million new shares.
In a dull market, analysts believe, investors could be keener on the lower end of the price range since the success of the deal would depend much on how WH integrated with the United States pork company.
The net proceeds from the listing will be used to repay the US$4 billion syndicated loan the group took out to buy Smithfield last year, bringing the gearing ratio down to about 50 per cent from 236.6 per cent.
WH has bank loans of US$4.9 billion after taking on the US$3 billion debt of Smithfield, which holds 31.7 per cent of the US fresh pork market.
If it goes through, the deal will be the largest listing for Hong Kong this year, giving the exchange a major boost after e-commerce giant Alibaba decided to ditch the city for New York to raise funds.
The shares are scheduled to be priced next Tuesday and trading is expected to begin on April 30.