* WH Group raising funds to repay debt for Smithfield acquisition
* Listing comes after second attempt at an IPO
* Shares sold in IPO at HK$6.20 each, 11.5 times 2014 price to earnings (Adds outlook for pork demand, analyst comment)
HONG KONG, Aug 5 (Reuters) - WH Group Ltd, the world's biggest pork company, surged 7 percent in its Hong Kong trading debut on Tuesday after sharply scaling back valuations in its second attempt at an IPO.
While WH Group's $2.1 billion offering is the third-largest in Asia Pacific this year, it raised less than half the amount originally sought. Investors shunned an earlier proposal, turned off by ambitious pricing, sky-high executive compensation and mismanaged marketing following a record hiring of 29 banks.
To get the deal done, the firm slashed the offer price and hired just two banks, enabling it to repay a large chunk of the debt it incurred in its $4.9 billion acquisition of hog producer Smithfield Foods Inc - the biggest purchase of a U.S. firm by a Chinese company. Including debt, the deal was valued at $7.1 billion.
Although it has had a bumpy ride to market, many investors believe the company, formerly known as Shuanghui International Holdings, will do well in the long term, given China's huge and growing appetite for pork and its highly fragmented local market.
"They're going to have a pretty distinct advantage within China in terms of assets. There aren't many companies with the same sort of scale that they have and also international assets, so they can leverage that," said Stephen Yang, an analyst at Sun Hung Kai Financial in Hong Kong.
Per capita pork consumption in mainland China totalled just 41.36 kilograms in 2013, around half the 80.13 kg in Hong Kong, according to the IPO prospectus. Annual per capita consumption of animal protein in China was 55.79 kg, paling in comparison to the 111.38 kg in the United States.
WH Group shares closed at HK$6.66, up from its IPO price of HK$6.20 and giving the company a market value of $12.3 billion. The shares at one point rose as high as HK$6.86.
The IPO price represents a forecast price-to-earnings ratio for 2014 of 11.5 times, compared with a P/E of more than 20 times when the deal first went to market three months earlier.
That is also much lower than an average ratio of 23.9 times for U.S. meat processors according to a Sun Hung Kai Financial report. The average for international meat processors including Brazil's JBS SA and BRF SA is 20.4 times.
"When you relaunch deals that previously failed, you got to do it this way," said a source with direct knowledge of the offering. "This is a great lesson for Chinese corporates, learning through pain."
WH Group Chairman Wan Long, also known as China's chief butcher, told reporters attending the listing ceremony that the downsizing of the IPO had been "based on the needs of the market."
The share performance "is okay today. It should be better in the future," he added.
The company, which counts private equity firm CDH Investments, Goldman Sachs and Singapore state investor Temasek Holdings among its shareholders, offered 2.57 billion new shares or roughly 18 percent of the company.
CDH, Goldman and Temasek had initially hoped to sell WH Group shares but later backtracked after the first botched IPO attempt. CDH owns a 31.2 percent stake in WH Group after the IPO, while Temasek holds 2.6 percent and Goldman 3.2 percent.
Many WH shareholders have agreed not to sell any shares for at least six months following the listing. CDH Investments has a one-year lock-up on its holdings, while WH Group's chairman and other members of the firm's management team have a three-year lock-up.
The deal could grow by 385.1 million shares and total as much as $2.4 billion if underwriters exercise an option to meet additional demand.
In its second IPO attempt, the retail portion generated red-hot demand, accounting for 55.22 times the shares on offer, the company said in a filing on Monday. The institutional tranche of the IPO was "moderately over-subscribed."
Funds raised in the IPO will go towards paying down the $2.5 billion tranche of a loan maturing in 2016, while a remaining $1.5 billion tranche maturing in 2018 will be paid with cash from operations and future debt financing, WH Group has said. (Additional reporting by Dancy Zhang and Stephen Aldred; Editing by Edwina Gibbs)