WH Group, the world's biggest pork company, is slashing its proposed Hong Kong IPO and delaying the pricing to next week, sources with direct knowledge of the matter said on Tuesday, as market volatility and rich valuations turned investors off the deal.
Its initial plan had called for an offering of up to $5.3 billion, in what would have been the island city's biggest listing in four years. But Reuters calculations based on information from a source familiar with the revised plan show the deal is now expected to garner less than $2 billion.
WH Group said in a statement on Wednesday that it may reduce the size of the IPO but did not give reasons for the possible move. It added that if it did, it would publish a supplementary prospectus, resulting in a short delay to its original timetable.
It also warned that if conditions for the deal laid out in prospectus, which includes conditions related to pricing, were not met, the IPO could lapse. The downsizing caps a string of difficulties for the deal and is an embarrassing setback for the Chinese company that bounded onto the international stage last year with its $4.9 billion purchase of U.S.-based Smithfield Foods. It plans to use much of the funds raised in the IPO to pay back debt incurred in that acquisition.
Shareholders in WH Group who had hoped to partly cash out of their investments, such as China private equity firm CDH Group, Singapore sovereign wealth fund Temasek Holdings and Goldman Sachs Group, will now no longer do so under the revised plan, the sources added.
In addition to existing shareholders not selling their shares, WH Group will also sell fewer new shares than initially planned, IFR, a Thomson Reuters publication, reported, citing sources close to the company.