Chinese pork processor WH Group (00288.HK), formerly known as Shuanghui International Holdings, will consider cutting the size of its planned Hong Kong initial public offering (IPO) by more than 60 percent due to lukewarm interest from investors, the Hong Kong Economic Journal reported Wednesday, citing a source with knowledge of the matter.
The mainland company will now seek to raise between HK$10.14 billion and HK$14.82 billion (US$1.3-1.9 billion), against the original target of HK$41.12 billion, according to the report.
The originally planned fund-raising size would have topped the HK$24.17 billion raised by HK Electric-SS (02638.HK) earlier this year and become the largest IPO in Hong Kong this year.
But as some international investors have not shown much interest in the IPO due to the recent market volatility, WH Group’s shareholders are said to have decided not to sell existing shares and also planned to cut the number of new shares by more than 56 percent.
The final IPO amount will be decided based on the result of placement to international investors due on Tuesday night. Meanwhile, the float is seen postponed to May from April, according to the source.
The company is said to keep the IPO offer price range unchanged at HK$8.0-HK$11.25 a share. Based on the revised size of issue, the price-to-earnings ratio is estimated to be down to 13.9 to 19.3 times forecast earnings instead of the originally envisaged 15 to 20.8 times.
The company plans to use the share sale proceeds to repay loans borrowed for acquisition of US-based Smithfield Foods last year. As the IPO amount would be cut, there is speculation that the company may need to undertake further financing moves.
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