Li Ka-shing

ParknShop solo sale scrapped

Li Ka-shing's Hutchison Whampoa says timing not right for deal, joins stablemate Cheung Kong in HK$9b property sale in Shanghai

PUBLISHED : Saturday, 19 October, 2013, 3:12am
UPDATED : Sunday, 20 October, 2013, 12:25am

Companies controlled by Asia's richest man, Hong Kong tycoon Li Ka-shing, said yesterday that they were selling a Shanghai property venture for HK$9 billion but that the ParknShop supermarket chain was no longer up for individual sale, prompting fresh speculation about investment flight from the Hong Kong and mainland markets.

Hutchison Whampoa and Cheung Kong would each sell a 50 per cent stake in Extreme Selection, the owner of the company developing the property project at Lujiazui Ring Road in Shanghai, Hutchison said in a statement to the Hong Kong stock exchange after the market closed yesterday.

HYZL Development and HYZL Investment would each buy 47 per cent, while Diamond Gate Group, a China Everbright subsidiary, would take the remaining 6 per cent, a China Everbright statement said yesterday.

"This may be part of his plan to raise capital to finance more projects in Europe," said a fund manager who declined to be named. "But you can always argue he may be sort of losing confidence in the business environment in Hong Kong and China amid so many social disputes and uncertainties."

Signs that Li is losing faith in the hometown that helped make him Asia's richest man have been coming thick and fast since July, when his conglomerate, Hutchison Whampoa, sought to offload one of its cash cows, the ParknShop supermarket chain.

ParknShop, which generated HK$21.7 billion in revenue last year, could fetch US$2 billion in fresh funds. But Hutchison said in a statement last night that it had scrapped a plan to sell ParknShop as the sale "at this time would not deliver maximum value" to shareholders.

Market watchers said the reason for the withdrawal of the sale was that Hutchison had been reluctant to cut the price.

At the same time, potential buyers including Thailand's Charoen Pokphand Group and Australia's Woolworths were considering dropping their bids due to the sector's uncertain growth outlook.

Hong Kong's grocery store market is widely seen as saturated. It is expected to achieve a compound annual growth rate of 4.5 per cent over the next five years after reaching a peak of 8 per cent in 2010, according to research house Euromonitor.

ParknShop and its main rival, Dairy Farm International's Wellcome, accounted for more than 70 per cent of the city's grocery market last year.

Hutchison said yesterday that it would start a review process to maximise the value of its AS Watson retail businesses, which include ParknShop and health and beauty store chains across Asia and Europe, and might seek a public offering of them.

Known for his knack for selling assets at the peak of their value, Li's planned exit from the mass-retail market has prompted mixed feelings in Hong Kong. Some have expressed concern about an exodus of capital from the greater China market.

The net proceeds from the sale of the Shanghai property would be used as general working capital, Hutchison said.

Hutchison and Cheung Kong announced in October 2006 that they would spend 1.74 billion yuan (HK$2.2 billion) developing real estate in Lujiazui.