Investors eye liquidity as WH Group revives HK IPO

WH Group has filed a revised prospectus but the documents give no indication of the pricing or timing of the offering. The company is reportedly targeting $2-3 billion and will come to market in late July or early August.

The pork producer has slashed the number of banks working on the deal from 29 to just two - Bank of China International and Morgan Stanley. It is also seeking a lower valuation than during the previous listing attempt.

According to The Wall Street Journal, WH Group plans on pricing the offering at 12x forward earnings, rather than the 15-20.8x implied by the previous pricing. The valuation will also be lower than its Shenzhen-listed unit, Henan Shuanghui Investment & Development, which is trading at 17.8x forward earnings, and US-listed Tyson Foods, which trades at 14x.

None of the existing shareholders, including CDH Investments, Goldman Sachs, Temasek Holdings and New Horizon Capital, will sell shares in the offering.

WH Group - formerly Shuanghui International Holdings - bought US-based Smithfield Foods in September last year for $4.7 billion. It was the largest-ever buyout by a Chinese company in the US. The company then rolled out an option to sell 20% more shares on top of 3.66 billion shares on its initial $5.3 billion IPO plan in April, paving a way for PE investors to make a partial exit.

However, following a lukewarm response from investors, WH Group first slashed the size of the offering by more than half - with the PE investors withdrawing plans to sell shares - and then abandoned it completely. 

It was said that investors were unconvinced by the valuation sought by the company, although the combination of Chinese and US assets complicated the issue.

Concerns were also raised regarding executive compensation. CEO Wan Long and Executive Director Yang Zhijun received 818.7 million shares worth $597 million in 2013 in recognition of their "contribution to the acquisition of Smithfield by the directors," the filing said. The acquisition, valued at $7.1 billion including debt, comprised $4 billion in cash and $3 billion in debt.

The latest filing includes first-quarter earnings, which shows net profit than tripled year-on-year to $407 million for the three months ended in March.

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• Topics
• Greater China
• Exits
• Consumer
• China
• Consumer
• CDH Investments Management
• Exit
• Goldman Sachs
• IPO
• Hong Kong (China)
• Temasek Holdings
• New Horizon Capital