Li's Hutchison Port Trust said to expect $6.9b in IPO: Update

Li Ka-shing’s Hutchison Port Holdings Trust expects to raise $5.4 billion in Southeast Asia’s biggest initial public offering, according to three people with knowledge of the transaction.

The trust, which will own port assets in Hong Kong and China from Li’s Hutchison Whampoa, plans to sell about 5.4 billion units at US$1.01 each, said the people, who declined to be identified before an announcement. A final decision will be made on March 14, they said. The price range was initially set at 91 cents to US$1.08 before being narrowed to 99 cents to US$1.03.

 

The price “will make the yield more attractive,” Wong Sui Jau, general manager of Fundsupermart, the online division of IFAST Financial, which manages US$2.8 billion, said today in a Bloomberg TV interview. “It’s still overall a positive business because of Hong Kong’s proximity to China and China’s growth.”

 

Investors have cooled on Asian equities as unrest in the Middle East pushes oil prices higher and accelerating inflation from China to India prompts central banks to boost borrowing costs. The MSCI Asia Pacific Index has slipped 2% this year after gaining 14% in 2010.

 

DBS Group Holdings, Deutsche Bank AG and Goldman Sachs Group Inc. are managing the Hutchison Port sale, the world’s largest IPO this year. Hutchison Whampoa spokeswoman Laura Cheung wasn’t immediately available to comment.

 

PORT YIELDS

The port trust’s yield is expected to be 5.89% based on the final sale price and its 2011 earnings forecast, according to the people. Hong Kong-listed terminal operators China Merchants Holdings International Co. and Cosco Pacific will both have dividend yields of less than 3% this year, based on analyst estimates compiled by Bloomberg.

 

Hutchison, controlled by Li, Hong Kong’s richest man, fell 0.4% to HK$92.35 at the city’s noon trading break. It’s gained 15% this year, compared with the benchmark Hang Seng Index’s 1.7% advance.

 

China Hongqiao Group, the country’s largest privately owned aluminum producer, in January scrapped plans to raise as much as US$2.2 billion in a Hong Kong IPO, citing “deterioration in market conditions,” according to a Jan. 31 filing to the city’s stock exchange. China Kingstone Mining Holdings will sell stock in Hong Kong at the low end of a price range, according to a term sheet for the deal.

 

Companies have sold US$2.8 billion of IPO shares in the Asia- Pacific region this year, compared with US$18.5 billion in the first quarter of 2010, data compiled by Bloomberg show.

PORT ASSETS

Hutchison Port Holdings Trust will own assets including container terminals in Hong Kong and neighboring Guangdong province. Hutchison, the world’s container-terminal operator, will manage the trust and retain a 25% stake, according to a Jan. 18 statement.

 

Cornerstone investors led by Capital Research & Management Co. and Paulson & Co. will invest US$1.62 billion in the trust IPO, according to the prospectus filed with the Monetary Authority of Singapore.

 

Capital Research will invest US$634 million in the offering, according to the term sheet. Paulson & Co., managed by John Paulson, will buy a US$350 million stake and Lone Pine Capital LCC will invest US$186 million, it said. Jenkin Hui and family, Singapore’s state investment company Temasek Holdings, Cathay Life Insurance Co. and Metropolitan Financial Services will each invest US$100 million, and Ally Holding will buy a US$50 million stake.

 

The IPO will likely surpass the $4 billion raised in Singapore Telecommunications Ltd.’s 1993 offering, previously the city-state’s largest, and Petronas Chemicals Group Bhd.’s US$4.1 billion initial offering in November in Malaysia.

 

Hutchison, which also invests in drugstores, real estate and mobile-phone services, opted to sell the port assets in Singapore as business trusts can’t be listed in Hong Kong. The company chose a trust structure because of the assets’ stable cashflow and growth potential, it said in January.