WH Group massively cuts back Hong Kong listing
Pork supplier's Hong Kong IPO suffers blow after firm cuts new share issuance by 50pc while private equity firms hold on to shares
WH Group, the world's largest pork processor formerly known as Shuanghui International, has been forced to substantially cut down its proposed initial public offering and consequently delayed its pricing given tough market conditions, people familiar with the deal said.
The Sino-US pork producer's decision to scale back its share sale shocked the city's listing market and market participants since the deal was well-supported by a record 29 underwriters and private equity outfits.
"A lacklustre market condition in Hong Kong's stock market has propelled the company to offer a more market-friendly structure in terms of both the offering size and valuation," said a senior banker close to the firm. "The company will reduce the new share issuance by 50 per cent, without taking any existing shares from private equity firms."
The new share issue will represent 10 per cent of the enlarged group, down from an original 25 per cent.
WH declined to comment on the reasons behind the delayed offering.
The firm, which acquired Smithfield Foods for US$4.7 billion last year, was forced to delay its pricing of the offering to next week, from an original schedule that would have put the Hong Kong float in an indicative marketing range between HK$8 and HK$11.25 apiece yesterday.
"The trimmed IPO of WH Group has not surprised me as the overall market conditions remain fairly weak after the city's turnover reached a recent low," said a Hong Kong-based hedge fund manager. "There are too many brokers pitching on the same deal, but not many received an order due to concerns over an expensive valuation."
Funds investing in greater China lost 3.42 per cent in March, underperforming the CSI 300 Index which declined 1.5 per cent last month, according to Eurekahedge, a hedge fund industry tracker. China continued to post disappointing economic data during the month, indicating that February's weakness was not merely an aberration caused by the Lunar New Year.
Separately, analysts said investors had given a larger discount on the integration of Shuanghui and Smithfield Foods. WH hired a record 29 underwriters to handle the offering, but it named only four banks - BOC International, Goldman Sachs, Morgan Stanley, and UBS - as active bookrunners to avoid confusion among the unusually large sales force.
Meanwhile, 14 out of 16 recently listed companies, including Li Ka-shing's US$3.1 billion offering of 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.
Under the WH revised share sale plan, all the private-equity firms would not offload any shares through the offering.
In contrast to the tepid sentiment in Hong Kong, the mainland securities regulator unveiled another 18 preliminary listing prospectuses on Monday night, after disclosing 28 companies' listing documents last week.