Hutchison Whampoa is a Fortune 500 company and one of Hong Kong’s largest listed companies. It is 49.97 per cent owned by the Cheung Kong Group, a property company. Hutchison’s origins date back to two companies founded in the 19th century – Hong Kong and Whampoa Dock, established in 1863 by British merchant John Duflon Hutchison, and Hutchison International in 1877. In 1977, Hutchison became Hutchison Whampoa Ltd. Its operations include ports, with operations across Europe, the Americas, Asia, the Middle East and Africa, property and hotels, retailing through AS Watson & Co, PARKnSHOP supermarkets, Fortress electrical appliance stores, telecommunications through Hutchison Telecommunications International Ltd. It is also involved in infrastructure through its infrastructure arm, Cheung Kong Infrastructure, and has an interest in Hongkong Electric Holdings (HEH), the sole electricity supplier to Hong Kong Island and Lamma Island. Hutchison is also a major shareholder of Husky Energy, one of Canada’s largest energy and energy related companies. It is headed by Li Ka-shing, Asia’s wealthiest man, who has been nicknamed “Superman” because of his investment prowess.
A.S. Watson sale tipped to hit price snag again
With Li Ka-shing reviewing the retail operation, observers say impasse over the ParknShop valuation is likely to resurface with any sale move
Li Ka-shing's determination to cash out of the AS Watson retail businesses after his recent setback in offloading his ParknShop supermarket assets is likely to meet the same problem: buyer resistance on price.
The proposed sale of ParknShop, one of the city's two largest supermarket chains, attracted attention from more than a dozen potential bidders.
At least four companies - Thai industrial giant Charoen Pokphand Group, Australian retailer Woolworths, state-owned China Resources Enterprise and Japan's Aeon - were expected to submit bids before the deadline. But only two companies made non-legally-binding bids, which were both far below the seller's expectations.
"It shows in today's market environment how difficult it is for Li Ka-shing to find the right buyer for the price level that he and his investment bankers believe is right for the asset," said one source close to the situation.
Another source, who also declined to be identified because of bidding confidentiality, said: "We're talking about US$1 billion or even US$2 billion in difference [between the bids and the expected price level] rather than just several hundred million. Such a big difference can easily and quickly kill the deal because there will be almost no room for negotiations."
Woolworths and the CP Group were the only firms to proceed with bids for ParknShop, which, with its main rival Dairy Farm International's Wellcome, accounted for more than 70 per cent of Hong Kong's grocery market last year. ParknShop is part of the AS Watson retail businesses owned by the Li-controlled Hutchison Whampoa.
Both bidders valued any deal to buy the supermarket chain at less than US$3 billion. Hutchison's target price was US$4 billion, the sources said.
One of the two bidders made an offer of only about US$2 billion, the first source said.
Woolworths was widely considered to be the most serious bidder for ParknShop, but the Australian company had financial limitations. Goldman Sachs and Bank of America Merrill Lynch, the two banks that have been working with Asia's richest man on various projects over the past few years, advised on the ParknShop sale for Hutchison.
On October 18, Hutchison surprised the market by scrapping the ParknShop sale. Instead, it announced it would start a review to maximise the value of its AS Watson retail businesses.
Aside from ParknShop, the operations include health and beauty store chains across Asia and Europe.
The firm said it would consider all options, which market watchers widely believed meant a public listing of AS Watson or a sale of the entire retail businesses under AS Watson's umbrella, which some analysts said could raise about HK$100 billion.
Since the failed attempt to offload ParknShop, doubts over Hutchison's next move to dispose of its retail businesses have increased, largely because of the constraints on potential buyers and the same concerns about valuations, the sources said.
"In the case of ParknShop, Aeon was not a very serious bidder. It seemed to be more like window shopping. And recent events involving CP and China Resources made them focus more on their own developments," the second source said.
China Resources recently announced a partnership with Britain's Tesco for joint ventures on the mainland. CP sold most of its supermarket stores on the mainland to China's Wumart.