Billionaire Li Ka-shing’s (李嘉誠) Hutchison Whampoa Ltd (和記黃埔) is considering selling shares in its A.S. Watson Group retailing unit in what may become Asia’s biggest initial public offerings (IPO) in three years.
Hutchison will review all options for the unit, including a public offering, that will allow it to retain control, it said in statement on Friday last week. It could raise as much as HK$98 billion (US$13 billion) by spinning off part of A.S. Watson, according to Credit Suisse Group AG, making it the biggest IPO listing in Asia since AIA Group Ltd’s US$20.4 billion offering in 2010.
Hong Kong-listed Hutchison is considering the spinoff after scrapping plans to sell its ParknShop supermarket chain and a review by its financial advisers. A.S. Watson has more than 11,000 stores operating in 33 markets worldwide, according to its Web site, and its brands include health retailer Superdrug in the UK, Rossmann in Germany and namesake stores in Asia.
“Hutchison Whampoa share price will be under pressure in short term to reflect the disappointment the investors have over its failed attempt to sell ParknShop,” UoB Kay Hian Holdings Ltd (大華繼顯控股) director Steven Leung (梁偉源) said by telephone yesterday. “The spinoff of A.S. Watson would be a better option for Hutch in the long run as it could unlock a more attractive valuation given the assets are more appealing.”
Hutchison has not specified the timing, valuation or listing location of any potential offering. If the company decides to list a Watson spinoff in Europe, it could become the largest regional IPO since the US$17.3 billion sale of Enel SpA, Italy’s largest utility, in 1999, according to data compiled by Bloomberg.
The A.S. Watson business could have a market value of as much as HK$201 billion if Hutchison spins off 49 percent, according to Credit Suisse. Earnings growth in the retail business has remained strong across different regions, especially Germany and the Netherlands, the Credit Suisse analysts said.
Hutchison shares fell 2.8 percent to HK$94.05 in Hong Kong trading yesterday after announcing plans to scrap the ParknShop sale. The city’s benchmark Hang Seng Index rose 0.6 percent.
Hutchison also operates ports, hotels and provides telecommunication services. Li has stepped up investments in Europe, buying telecom and utilities businesses, betting growth will outpace some of his Hong Kong assets. The billionaire is planning to list his Hong Kong electricity business.
A.S. Watson, which also operates retail stores that sell beverages, wines and electronics, posted sales of HK$148.6 billion last year, with earnings before interest and taxation of HK$10 billion, according to its annual report.