Oct 22, 2013

    Elementary, dear Watson, a $16b IPO

    BILLIONAIRE Li Ka-shing's Hutchison Whampoa is considering selling shares in its AS Watson Group retailing unit, in what may become Asia's biggest initial public offering 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 a statement on Friday.

    It could raise as much as HK$98 billion (S$16 billion) by spinning off part of AS Watson, according to Credit Suisse Group, making it the biggest IPO listing in Asia since AIA Group's US$20.4-billion (about S$25 billion) offering in 2010.

    Hong Kong-listed Hutchison is considering the spin-off after scrapping plans to sell its ParknShop supermarket chain and a review by its financial advisers.

    AS Watson has more than 11,000 stores operating in 33 markets worldwide, according to its website, and its brands include health retailer Superdrug in Britain, Rossmann in Germany and namesake stores in Asia.

    "Hutchison Whampoa's share price will be under pressure in the short term, to reflect the disappointment investors have over its failed attempt to sell ParknShop," said Mr Steven Leung, a director at UOB Kay Hian.

    "The spin-off of AS Watson would be a better option for Hutchison in the long run as it could unlock a more attractive valuation, given that the assets are more appealing."

    Hutchison has not specified the timing, valuation or listing location of any potential offering.

    AS Watson, which also operates retail stores that sell beverages, wine 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.

    Hutchison was seeking US$3 billion (S$4 billion) to US$4 billion for ParknShop, which controlled 33 per cent of Hong Kong's grocery market last year, a source said in August. But the plan has now been shelved.

    The failure to seal a deal with any one of four bidders, which included Thailand's CP Group and state-controlled China Resources Enterprise, suggested that price expectations were too high.

    Nicknamed "Superman" by Hong Kong's media for his investing prowess, the 85-year-old Li is Asia's richest man with a net worth of US$29.4 billion, according to the Bloomberg Billionaires Index.

    The mogul built his empire by buying fast-growth businesses at the bottom and selling low-growth businesses at the top. Hutchison also operates ports and hotels, and provides telecommunication services.