HONG KONG: Tycoon Li Ka-shing made the initial public offering of a Hong Kong utility as cheap as he could, seeking to bolster investor appetite as he considers whether to sell shares in another Li company in what could be the world’s biggest-ever retail IPO.
Defying a reputation among Hong Kong investors for selling assets at peak valuation, Asia’s richest man on Wednesday priced HK Electric Investments Ltd’s sale at $3.1bn, the bottom of a targeted range. In last year’s original plans, the utility investment trust controlled by Li’s Power Assets Holdings Ltd was expected to raise up to $5.7bn.
After two companies in his conglomerate lost about a third of their value since their 2011 IPOs, Li’s choice reflects a need to restore the Hong Kong market’s confidence. The 85-year-old is reviewing strategy options that include a possible listing that could value retailer AS Watson Co Ltd at about $23bn, raising funds to fuel a major drive in health and beauty products in China.
The sale of HK Electric, which owns the utility that brought electricity to the city in 1890, is still the biggest IPO in Asia excluding Japan since the $3.6bn listing by People’s Insurance Group of China Co Ltd (PICC) in November 2012. Power Assets will use proceeds from the spinoff for expansion overseas.
“Building a relationship with the market is important” for a Watson deal later in the year, said an equity capital markets banker in Hong Kong who is familiar with the deal but not authorized to speak publicly on the matter. “This IPO needs to trade up. People need to feel good about buying Li Ka-shing deals.”
The regulated, low-growth environment of the utility sector is far-removed from the kind of interest the man dubbed ‘Superman’ in Hong Kong will hope to drum up in a potential Watson IPO in what’s set to be a marquee year for Hong Kong bankers.
With major economies picking up steam and companies chasing funds to tap into growth opportunities, advisory firm PwC estimates Hong Kong IPOs could raise $32.2bn in 2014, the highest since 2010 and nearly double the 2013 tally of $17.1bn.
Among big-ticket deals expected to be launched in Hong Kong this year are a $2 billion offer from Chinese carmaker BAIC Motor, backed by Daimler AG, and a $5 billion listing from Chinese meat processor Shuanghui International Holdings.
Though reflecting reined-in ambition, the January 29 listing means the HK Electric trust, housing a business that supplies power to 568,000 registered customers, carries a projected higher yield than other publicly traded city utilities.
The IPO was priced at HK$5.45 per unit, compared with a marketing range of HK$5.45 to HK$6.30 each, Power Assets said in a regulatory filing on Wednesday. The trust offered 4.43 billion units, putting the deal size at HK$24.1bn ($3.1bn).
Bankers said the price should help produce a solid early showing for the trust. “The valuation was just too high. There is a lot of pent-up demand in the market, but investors are very selective,” said another equity capital markets banker.
Reuters
