Pork producer WH lowers IPO price range

Share sale marketed at a lower valuation as Sino-US firm faces weakness of IPO market

PUBLISHED : Wednesday, 02 April, 2014, 3:41pm
UPDATED : Thursday, 03 April, 2014, 5:04am

WH Group, the Sino-US pork producer formerly known as Shuanghui International, is marketing its US$6 billion share sale in Hong Kong at a lower valuation than previously sought amid a tepid market, people familiar with the deal said.

The world's largest pork company, based in Henan province, has kicked off pre-marketing for its initial public offering after it received approval from the Hong Kong stock exchange last week.

The indicative price range is likely to be between 15 and 18 times forecast earnings for this year, as against the 20 times the firm's senior management had indicated earlier, the sources said.

"Investors have shown keen interest and positive feedback on the Shuanghui deal given its size and investment story," one of the sources said. "The latest marketing range is more realistic given current listing conditions."

While the flotation would potentially give WH's private equity investors an opportunity to exit, it is still unclear how many shares the existing shareholders - such as CDH Investments, Goldman Sachs, New Horizon Capital and Temasek - plan to offload during the global offering.

Shanghai-based CDH, one of the mainland's biggest private equity firms, is the biggest shareholder, with a 33.7 per cent stake held in four funds, Shuanghui's 2012 annual report shows.

A CDH spokesman declined to say how many shares the firm plans to sell.

The fresh capital raised by WH, which acquired the world's largest pig and pork producer, Smithfield Foods, for US$4.7 billion last year, could help pay down debt used to acquire the US firm. Shuanghui received a US$4 billion syndicated loan from more than 20 banks, including Morgan Stanley and Bank of China, which has a long-standing relationship with the firm.

WH is due to take orders from investors on Thursday next week, followed by pricing of the offering on April 22, according to the tentative schedule.

A spokesman at WH declined to comment on the deal.

It comes at a time when Hong Kong's IPO market is in need of a fresh boost. Li Ka-shing's health and beauty flagship, AS Watson, called off its multibillion-dollar public offering after selling a 25 per cent stake last month to Singapore state-owned investment firm Temasek.

Meanwhile, 12 out of 15 newly listed companies, including Li's HK Electric Investments, one of the world's largest IPOs this year, have fallen below their debut prices, and at least two deals - microcredit lender Hanhua Financial and luxury car dealer Sunfonda - are on hold.