Hutchison to spin off port unit with IPO
SINGAPORE - Li Ka-shing's Hutchison Whampoa Ltd, the world's biggest container-terminal operator, will sell deep-water port holdings in Hong Kong and the southern parts of the Chinese mainland, hubs of record global trade, in what may be Singapore's largest-ever initial public offering.
The company will retain a stake of about 25 percent in the trust that will own terminals in Hong Kong and neighboring Guangdong province, port operations along the Pearl River and shipping-support businesses, it said in a statement on Tuesday.
The Hutchison Port Holdings Trust offering may raise at least $6 billion, Reuters said, citing IFR, an affiliated news service. Hong Kong-based Hutchison is selling the assets, with an operating margin of about 50 percent, as China's efforts to cool its economy threaten to damp exports that have jumped six-fold in a decade.
"Hutchison may want to do the IPO before that policy really starts to affect the port business," said Jay Ryu, a Hong Kong-based analyst at Mirae Asset Securities. "Things seem to have slowed down with China trying to curb growth."
The country told banks to set aside more deposits as reserves for the fourth time in just over two months last week. It also raised interest rates on Dec 25 after food costs jumped 12 percent from a year earlier in November.
Jeremy Lau, a spokesman for Hutchison, wasn't available to comment when called by Bloomberg News. DBS Bank Ltd, Deutsche Bank AG and Goldman Sachs Group Inc will manage the listing, the statement said.
A $6 billion sale "doesn't seem to be a crazy figure" based on rough calculations, Ryu said. The IPO could be the largest in Singapore, he said.
The assets to be sold generate about half of earnings before interest, tax, depreciation and amortization at Hutchison's port unit, Fitch Ratings said in a statement. The sale will likely result in a "meaningful" reduction in Hutchison's debt, without affecting its A- rating, Fitch said. A- is Fitch's seventh-highest investment grade.
Hutchison fell 2.4 percent to close at HK$93.50 ($12.01)in Hong Kong. The company jumped 65 percent in the past year, the best performance in the Hang Seng Index.
Li, Hong Kong's richest man with a $24 billion fortune, according to Forbes, arrived in the city as a refugee from the Chinese mainland in 1940. He swept factory floors to survive during the Japanese occupation of Hong Kong during World War II. After the war, he opened a plastic-flower factory and began buying Hong Kong property in 1967 when riots caused land prices in the city to collapse. The 82-year-old is the chairman of Hutchison and controls it through his flagship company Cheung Kong Holdings Ltd.
Hutchison, which also invests in real estate, mobile-phone services, infrastructure and drugstores, said the sale would help it pay for expansion plans and pare debt, without elaborating. The new trust, to be managed by Hutchison, will also be more easily able to raise funds, according to the statement.
"This new public vehicle will be an integral part of the group's global ports operations," Hutchison Managing Director Canning Fok said in a statement. The trust "will provide the best ongoing structure for operation, development and financing of future growth of its port operations in the Pearl River Delta."
Bloomberg News
(China Daily 01/19/2011 page15)
