* WH Group says "excessive market volatility" weighed on IPO
* Decision comes after slashing planned offering size by
(Recasts with company confirmation, adds details on loan)
By Elzio Barreto and Daniel Stanton
HONG KONG, April 30 China's WH Group Ltd, the
world's biggest pork company, has cancelled its planned Hong
Kong IPO as a downturn in equity markets weighed further on
demand even after it cut the offer size by two-thirds.
The decision is a setback in the company's effort to cut the
large debt it took on to seal the $4.9 billion acquisition of
Smithfield Foods Inc last year.
It also caps a tumultuous four weeks for WH Group, during
which the company and its bankers faced mounting questions from
investors skeptical of paying top valuation in the IPO without
clear signs of cost savings from the combination with
Smithfield, sources involved in the deal have said.
"In light of deteriorating market conditions and recent
excessive market volatility, the company, having consulted the
joint sponsors, has decided that the global offering will not
proceed at this time," WH Group said in a securities filing late
The company last week slashed the offer size by two-thirds.
This was a result, fund managers and bankers said, of WH Group
and its owners seeking too high a price, hiring too many
underwriters - a record 29 - as well as negative publicity over
some sky-high executive compensation.
It also had bad luck as sentiment towards new listings slid
"If market conditions improve, the deal might be revived at
some point, but it's hard to set a date at this point in time,"
a source involved in the deal said. Sources familiar with the
IPO declined to be named as they were not authorized to speak
publicly on the matter.
WH Group, whose products include Smithfield ham and Farmland
bacon in the United States, offered 1.3 billion new shares in a
revised deal valued at up to HK$14.61 billion ($1.9 billion).
It had marketed the IPO in an indicative range of HK$8.00 to
HK$11.25 per share.
The IPO was cut last week from the original size of up to
$5.3 billion which involved WH Group and a group of shareholders
including private equity firms CDH Investments and New Horizon,
Goldman Sachs and Singapore state investor Temasek
Holdings selling shares.
WH Group had planned to use $4 billion of the original IPO
proceeds to pay down the loan it took with a group of banks to
The loan has two tranches, one maturing in 2016 that pays
interest equivalent to the London Interbank Offered Rate (Libor)
plus 3.5 percent and another maturing in 2018 that pays Libor
plus 4.5 percent, leaving the company with some time to raise
funds from other sources to meet debt payments.
WH Group hired a record number of underwriters for the deal,
surpassing the previous all-time high of 21 mandated for China
Galaxy Securities Ltd's $1.1 billion IPO last year.
BOC International, Citic Securities International, DBS,
Goldman Sachs, Morgan Stanley, Standard Chartered and UBS were
hired as sponsors of the share offer.
Bank of America Merrill Lynch, Barclays, China International
Capital Corp (CICC), Credit Suisse, Deutsche Bank, ICBC
International, JPMorgan and Rabobank also acted as joint global
coordinators, with another 13 banks hired as bookrunners.
($1 = 7.7532 Hong Kong Dollars)
(Reporting by Elzio Barreto and Daniel Stanton of IFR; Editing
by Denny Thomas, Pravin Char and Edwina Gibbs)