As Watson

Move to delay listing AS Watson surprises market

Initial public offering of Li Ka-shing's retailing arm had been expected to be launched this year

PUBLISHED : Saturday, 22 March, 2014, 1:30am
UPDATED : Saturday, 22 March, 2014, 1:30am

Li Ka-shing's decision to delay the listing of AS Watson surprised the market, but his sale of 24.95 per cent of the retail company to Singapore sovereign wealth firm Temasek will benefit shareholders, analysts said.

Hutchison Whampoa, the conglomerate controlled by Asia's richest man, announced it would sell the Watson stake to Temasek for HK$44 billion.

Watson operates more than 10,500 health and beauty product stores in 25 markets worldwide.

"The fact that it delayed the initial public offering was a surprise because the market was expecting it this year," said Kenny Tang Sing-hing, the general manager of AMTD Financial Planning.

Hutchison's sale reaped an exceptional gain for Hutchison and benefited its shareholders in the form of a generous dividend, Tang said.

Part of the proceeds from the sale would be used to pay a special dividend of HK$7 per share to Hutchison shareholders, the company announced yesterday.

On February 28, Li said Hutchison hoped to list Watson in Hong Kong and another stock exchange later this year. But at a press conference yesterday, he said the listing was unlikely to happen this year but might take place in two to three years.

A possible reason for the delay was the weak market environment, Tang said.

Li's sale of assets has prompted speculation that he may be withdrawing his investments from Hong Kong, which he has denied.

On March 14, it was reported that his port business, Hutchison Port Holdings Trust, would sell a 60 per cent stake in Terminal 8 West container port for HK$2.47 billion to mainland shipping and port companies Cosco Pacific and China Shipping Terminal Development.

"It may not be true that Li Ka-shing is pulling out of Hong Kong. Hutchison's strategy is to realise its asset value. Many of its assets are now mature," Tang said.

Now is a good time for Li to sell his assets because interest rates would rise next year following the decision of the United States to end a stimuls programme, Guotai Junan analyst Jason Song said. "Li Ka-shing's companies have lots of debt."

Part of the proceeds of the Watson sale would be used to discharge debts of Hutchison's retail division, Hutchison said.

Separately, China Huiyuan Juice also announced yesterday Temasek had bought US$150 million of convertible bonds of the mainland juice producer. The bonds can be converted into a 7.68 per cent stake in Huiyuan.

The announcement of two Hong Kong investments by Temasek on the same day was pure coincidence, said a source close to Temasek.