* WH Group's IPO world's 2nd-biggest by food and beverage
company behind Kraft
* Goldman Sachs, CDH Investments, New Horizons, Temasek
selling shares in WH Group
* IPO slated for pricing on April 22, market debut on April
(Adds details on anchor book, comments, global pork demand
By Elzio Barreto
HONG KONG, April 10 China's WH Group Ltd, the
world's biggest pork company, has launched a Hong Kong initial
public offering of as much as $5.3 billion in the second-largest
ever IPO by a food and beverage company.
The IPO is coming at a time when Hong Kong's stock market
has been hit by volatility arising from concerns about political
tensions in Russia, slower growth in China and when the U.S.
Federal Reserve may raise borrowing costs.
In view of the market conditions, WH Group and some of its
shareholders are offering shares in a relatively wide range of
HK$8.00 to HK$11.25 each. A total of 3.65 billion new and
existing shares will be offered, putting the deal at up to
HK$41.06 billion ($5.3 billion), according to a term sheet seen
by Reuters on Thursday.
WH Group, whose products include Smithfield ham, Carando
pepperoni and Farmland bacon in the United States, has been
pre-marketing the IPO since last week. It plans to use some of
the proceeds to pay down debt it took as part of its $4.9
billion takeover of U.S.-based Smithfield Foods Inc last year,
people familiar with the plans have said.
The group has "a good anchor book", though it has signed no
cornerstone investors due to volatile global markets, a source
familiar with the deal said, declining to be identified because
details of the IPO process have not been publicly disclosed.
Typically, a deal the size of WH Group's would tap
cornerstones, which receive a guaranteed allocation in exchange
for agreeing to retain their stakes for a set period.
"Volatility is part of the reason," added the source.
Though Hong Kong's shares are trading at their 11-week
highs, the benchmark stock index is down about 2.3
percent so far in 2014, bouncing between gains and losses of
more than 7 percent along the year.
Shares of small Chinese pork producer Huisheng International
Holdings Ltd have fallen 14.6 percent since their
debut in Hong Kong on Feb. 28. Its tiny $32 million IPO, which
was swamped by a horde of mom and pop investors, was seen as one
gauge for investor demand for consumer stocks.
The WH Group listing would be the world's second-biggest
ever food and beverage IPO after Kraft Food Inc's $8.7 billion
deal in June 2001. It would also be the largest new listing in
the Asia-Pacific since AIA Group Ltd raised $20.5
billion in October 2010.
WH Group could increase the size of the IPO to $6.11 billion
if underwriters exercise a greenshoe option to meet additional
Pricing for the IPO is slated for April 22, with the shares
making their debut on the Hong Kong stock exchange on April 30.
To draw investors to its IPO, WH Group is banking on the
growth potential of Chinese demand for pork and processed meat.
The takeover of Smithfield will help WH Group's Chairman and CEO
Wan Long, known as China's "Chief Butcher," secure a steady
supply of pork to meet the expected demand growth at home,
people in the industry have said.
WH Group's history dates back to 1958, when it started
operating as Luohe Cold Storage to process and store perishables
in Luohe, in China's central Henan province.
The group listed its Henan Shuanghui Investment &
Development Co Ltd unit in December 1998 in Shenzhen
and owned 73.3 percent of the unit as of December 2013, with the
remainder of the shares trading publicly.
The group's acquisition of Smithfield, completed in
September last year, would help secure supplies to China, where
WH Group expects will account for most of the world's pork
consumption growth in the next few years.
The U.S. company grew from a single meat-packing plant in
1936 to a global giant with nine slaughtering plants and the
capacity to process one entire hog nearly every second. Its
headquarters in Smithfield, a small town in Virginia state, is
known as the "Ham Capital of the World."
Global pork consumption grew an average 1.97 percent a year
from 2008 to 2012 and is forecast to expand 1.99 percent from
2012 to 2018, WH Group said in its preliminary prospectus,
citing estimates from research firm Frost & Sullivan.
The bulk of the growth will come from China, where
consumption is set to expand 3.1 percent a year through 2018,
the company said.
In 2012, per capita consumption of animal protein in China
reached 53.9 kilograms, paling in comparison to the 111.29
kilograms in the United States, according to the prospectus.
HONG KONG IPOS
The WH Group deal would nearly double IPO volumes in Hong
Kong since the beginning of the year to $12.1 billion and lift
the city past New York as the world's biggest venue for new
listings so far in 2014.
About 80 percent of the offering consists of new shares from
WH Group, with the rest to be sold by existing shareholders
looking to reduce their stakes.
Selling shareholders include a subsidiary of Goldman Sachs
, Singapore state investor Temasek Holdings and
CDH Investments - one of China's biggest and oldest private
Private equity firm New Horizons - founded by Winston Wen,
son of China's former premier Wen Jiabao - will also be selling
part of its stake, the term sheet showed.
($1 = 7.7531 Hong Kong Dollars)
(Reporting by Elzio Barreto; Editing by Ryan Woo)