WH Group back with US$3b IPO and a new story for investors

PUBLISHED : Friday, 11 July, 2014, 1:31am
UPDATED : Friday, 11 July, 2014, 1:31am

Sino-US pork producer WH Group will relaunch its stalled initial public offering in a deal that could raise US$3 billion in one of the biggest share sales in the city this year.

"The deal is expected to be completed before mid-August," a source with knowledge of the listing plan told the South China Morning Post. "It will raise at least US$2 billion and maybe as much as US$3 billion," the source added.

The revival of the share sale comes three months after the original offer collapsed on a combination of factors including poor market conditions, a disclosure of massive payments to two company executives and conflicting messages to investors from a record 29 investment bank bookrunners.

Market sources said Morgan Stanley and Bank of China International - two of the original leads on the April offer along- side Goldman Sachs and UBS - were co-sponsors of the new share sale which would have a much slimmer line-up of bookrunners.

There are a lot of people who like this story and the shares are being offered at a price investors are prepared to pay

The April flotation at first aimed to raise US$6 billion and was eventually scaled back to US$1.9 billion before being scrapped.

WH updated its prospectus late on Wednesday with new financial data showing a surge in first quarter net profit to US$407 million, more than three times the US$125 million it earned in the same period a year ago.

Bankers believe the improved profit performance, US pork prices at record levels and steadily increasing demand for the mainland's favourite meat should be enough to counter any lingering doubts among investors who rejected the April deal as overpriced.

"There are a lot of people who like this story and the shares are being offered at a price investors are prepared to pay," the source with knowledge of the listing plan said.

The shares are likely to priced at around 12 to 15 times 2014 expected earnings, said one investment banker on the transaction, who declined to be identified. The original April deal marketed shares in the range of 16 to 20 times earnings.

The listing aims to raise funds to pay back loans incurred by the formation of WH when Shuanghui, the mainland's top meat producer, bought out US pork supplier Smithfield Foods in a landmark US$4.7 billion deal last year.