Hong Kong tycoon Li Ka-shing is expected to use proceeds from what could be the world’s biggest retail sector IPO to expand his health and beauty business in China - a market forecast to grow by around 40 per cent to US$186 billion (HK$1.44 trillion) by 2015.
In the process, Li would aim that firepower against foreign rivals such as Mannings, controlled by Jardine Matheson Group’s Dairy Farm International Holdings; Alliance Boots, 45 per cent-owned by Walgreen, the biggest US drugstore chain; and Vivo, part of China Resources Enterprise Ltd.
Billionaire Li’s conglomerate Hutchison Whampoa last week scrapped the sale of ParknShop, its Hong Kong supermarket chain, and said it would carry out a strategic review of AS Watson Company Ltd, its retail arm, which includes ParknShop, the Watsons, Superdrug and Kruidvat personal care stores, Fortress electronic appliance outlets, and chains selling food and wine and luxury and cosmetic products.
That review may include an initial public offering of all or parts of the business, it said, without elaborating.
Applying a 14 times multiple to last year’s earnings before interest, tax, depreciation and amortisation (EBITDA) of US$1.64 billion, an IPO could value AS Watson at about US$23 billion, bankers and analysts estimate. If 25 per cent of AS Watson is floated - a standard Hong Kong IPO percentage - the IPO could raise close to US$6 billion.
Health, beauty and luxury retailing accounted for 82 per cent of last year revenue at AS Watson, which has its roots in a small dispensary set up in 1828 to provide free medical services to the poor in the southern province of Guangdong.