PE-backed WH Group to scale back Hong Kong IPO
WH Group, the PE-backed Chinese meat processing company that acquired US pork producer Smithfield Foods, is set to reduce the size of its Hong Kong IPO size and delay pricing of the deal.
"The company may reduce the size of the Global Offering, and accordingly publish a supplemental prospectus to the prospectus which would result in a short delay in the timetable," WH Group said in a regulatory filing.
The exact scale of downsizing has yet to be announced but The Wall Street Journal said WH Group has cut the offering by more than half, reducing it to a maximum of $1.9 billion due to investors' lackluster response.
The Chinese pork producer - formerly known as Shuanghui International Holdings - had been planning to raise up to HK$41 billion ($5.3 billion). It proposed to sell 3.66 billion shares, of which 20% are held by existing shareholders.
The float - which could give the company a valuation of up to $21 billion - is set to be the world's second biggest IPO ever by a food and beverage firm after Kraft Food's $8.7 billion offering in 2001.
However, WH Group will now sell just 10% of its enlarged issued share capital, while retaining the indicative price range of HK$8-11.25 apiece, the report said. Existing shareholders will not sell their shares.
CDH Investments is the single largest shareholder in WH Group with a 38.1% stake, while the firm's management holds 42.6%. CDH first invested $250 million in Shuanghui alongside Goldman Sachs in 2006.
Other shareholders include Singapore state investment firm Temasek Holdings and New Horizon Capital, both of whom invested in the company in 2009.
WH Group bought Smithfield in September last year for $4.7 billiion. It was the largest ever buyout by a Chinese company in the United States. It is understood that the capital raised from the offering will be used to pay down debt used to finance the Smithfield acquisition.
Shanghui borrowed around $4 billion to buy Smithfield and took on $3 billion of the US firm's debt.
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