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WSJ: WH Group Raises $2.05 Billion in Hong Kong IPO

HONG KONG—Pork producer WH Group Ltd. raised US$2.05 billion in its second attempt at an initial public offering amid a recent rally in Asian shares. The Chinese company, which bought U.S.-based Smithfield Foods Inc. in a landmark deal last year, sold 2.57 billion shares at a fixed price of 6.20 Hong Kong dollars, or 80 U.S. cents, people familiar with the situation said Tuesday. The offer was smaller than the IPO the company withdrew in April—which was pegged at about US$5 billion—and cheaper in terms of valuation. Tuesday’s price represents 11.5 times forward 2014 earnings, rather than the 15 times to 20.8 times implied by the price range set in the original attempt. The new pricing attracted strong interest from retail investors. The company set the retail tranche at 5% of the offering, but subscriptions exceeded the shares on offer by 55 times, prompting the company to raise the allotment for Hong Kong public investors to 10%, the people said. The institutional tranche was expected to account for 95% of the deal but will now account for 90%. It received subscriptions for about three times the amount on offer. WH Group has an option to sell additional shares after listing, which would raise the deal size to US$2.36 billion. It plans to list on the Hong Kong Stock Exchange on Aug. 5, according to its prospectus. The IPO comes as Asia’s regional benchmark index hit a six-year high amid optimism over corporate earnings. The MSCI AC Asia Pacific is trading at 149.17, its highest level since June 2008, while Hong Kong’s benchmark Hang Seng Index is up about 6% in the past month. It is the second-largest IPO this year in the city, following a US$3.11 billion January IPO by HK Electric Investments Ltd., which owns power plants and electricity-distribution networks in the city, according to Dealogic. For the world’s biggest pork producer, China’s WH, a second try at an IPO looks set to succeed. WSJ’s Ramy Inocencio talks with Hong Kong bureau chief Ken Brown on why WH’s first IPO failed and why U.S. pork prices are cheaper than China’s. The successful fundraising may bode well for IPOs in the second half of the year. There are a number of billion-dollar deals in the pipeline, including a US$2 billion IPO by BAIC Motor Corp., a Chinese car maker that is partly owned by Daimler AG, and a US$1 billion offering by China Grand Automotive Services Co., in which U.S.-based private-equity firm TPG Capital has a stake. For the relaunched offering, WH Group had cut the number of underwriters to two— Morgan Stanley and BOC International, the investment-banking arm of Bank of China Ltd.—from 30. The large number of banks on the original deal caused confusion and poor communication with investors, people familiar with the situation previously said. Investors had balked at the high valuation but WH Group declined to lower the price, even after scaling back the size to US$1.9 billion before scrapping it altogether. Link:


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