* WH to issue fewer new shares -sources
* Shareholders to no longer cash out -sources
* Pricing delayed to next week instead of later on Tuesday
* Deal had no cornerstone investors, wide indicative range
* Executive share awards raised corporate governance
(Recasts and adds difficulties faced by deal)
By Elzio Barreto and Fiona Lau
HONG KONG, April 22 WH Group Ltd, the world's
biggest pork company, is slashing its proposed Hong Kong IPO and
delaying the pricing to next week, sources said, as market
volatility and rich valuations turned investors off the deal.
Its initial plan had called for an offering of up to $5.3
billion, in what would have been the island city's biggest
listing in four years. But Reuters calculations based on
information from a source familiar with the revised plan show
the deal is now expected to garner less than $2 billion.
The downsizing caps a string of difficulties for the deal
and is an embarrassing setback for the Chinese company that
bounded onto the international stage last year with its $4.9
billion purchase of U.S.-based Smithfield Foods Inc. It plans to
use much of the funds raised in the IPO to pay back debt
incurred in that acquisition.
Shareholders in WH Group who had hoped to partly
cash out of their investments, such as China private equity firm
CDH Group, Singapore sovereign wealth fund Temasek Holdings
and Goldman Sachs Group, will now no longer do
so under the revised plan, the sources added.
In addition to existing shareholders not selling their
shares, WH Group will also sell fewer new shares than initially
planned, IFR, a Thomson Reuters publication, reported, citing
sources close to the company.
A separate source told Reuters that the revised offering
would be equivalent to 10 percent of its enlarged share capital.
That would represent about 1.3 billion new shares, based on
WH Group's 11.69 billion existing shares. At the top of the
company's indicative range of HK$8.00 to HK$11.25 per share, the
revised IPO could be valued at up to $1.9 billion, Reuters
The company "plans to review the structure of the IPO
because of the continued volatile market," the source said. Hong
Kong's Hang Seng Index has lost ground since the beginning of
the year, falling as much as 9 percent in late March. It is
currently down 2.6 percent for the year to date.
WH Group declined to comment on its IPO pricing or plans.
Final pricing had been originally been slated for later on
Tuesday, with the company due to debut on the Hong Kong stock
exchange on April 30.
The deal got off to a rocky start, failing to attract any
cornerstone investors who usually anchor most IPO deals in Asia,
receiving a guaranteed allocation in exchange for agreeing to
retain their stakes for a set period.
An unusually wide indicative price range was then set, a
range that bookbuilding sources attributed to volatile markets
but which also suggested that valuing the company was difficult.
A record 29 banks working on the deal created another level
of confusion for fund managers, while a near $600 million share
award to WH Group's CEO and another executive in charge of its
mergers and acquisitions raised questions about corporate
The IPO also came just seven months after the Smithfield
acquisition, not much time to show investors how successful it
was in integrating the business.
The top end of the IPO price range gave the Smithfield
business an implied valuation if $13.5 billion, almost double
what WH Group paid last year, calculations by Breakingviews, a
Thomson Reuters publication, showed.
A Hong Kong-based hedge fund manager said WH Group had
sought to playing an arbitrage game.
"They bought Smithfield at a lower valuation than the IPO
valuation and then now they are turning to Hong Kong and using a
higher multiple," he said.
Under its initial plan, the company had offered 2.92 billion
new shares, while some of its shareholders offered 731 million
CDH, one of China's biggest and oldest private equity firms,
had offered the biggest chunk among selling shareholders with a
stake worth up to nearly $660 million. The second biggest sale
was from shareholder Ample Colour Ltd, which planned to offload
its entire holdings worth up to $136 million after buying them
from Goldman Sachs less than five months ago.
Goldman Sachs itself was set to raise as much as $71 million
from reducing its stake in WH Group, while Temasek had offered
up to $58.3 million of shares.
($1 = 7.7538 Hong Kong Dollars)
(Additional reporting by Nishant Kumar; Editing by Denny Thomas
and Edwina Gibbs)