Hutchison Whampoa Ltd., controlled by billionaire Li Ka-Shing, plans to list Hong Kong and Southern Chinese ports in a Singapore trust to raise funds for expansion plans. Photographer: Jerome Favre/Bloomberg
Li Ka-shing, chairman of Cheung Kong (Holdings) Ltd. and Hutchison Whampoa Ltd. Photographer: Jerome Favre/Bloomberg
Li Ka-Shing’s Hutchison Whampoa Ltd.,
the world’s biggest container-terminal operator, will sell deep-
water port holdings in Hong Kong and southern China, 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 today.
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
sixfold 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.
DBS Bank Ltd., Deutsche Bank AG and Goldman Sachs Group Inc.
will manage the listing, the statement said.
Frank Sixt, Hutchison Whampoa’s group finance director,
declined to comment on the size of the offering in a conference
call today with analysts and reporters.
Sale Size
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.
Hutchison fell 2.4 percent, the most in a month, to close
at HK$93.50 in Hong Kong trading. The company has jumped 63
percent in the past year, compared with a 13 percent gain for
the benchmark Hang Seng Index.
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.
Li’s Holdings
Li, Hong Kong’s richest man with a $24 billion fortune,
according to Forbes, arrived in the city as a refugee from China
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 tied to China’s Cultural Revolution
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
elaboration. The new trust, to be managed by Hutchison, will
also be able to raise funds more easily, according to the
statement.
“The Pearl River Delta has very good growth prospects in
terms of export trade and to a growing extent imports,” Sixt
said on the call. “Growth in this area has certainly not
peaked.”
The company doesn’t plan to inject other assets into the
new trust as it will only operate in the Pearl River Delta, Sixt
said. There also no plans to form other port trusts, he said.
Singapore IPOs
IPOs in Singapore raised $5.4 billion last year, with Global Logistic Properties Ltd.’s $3 billion offering being the
largest of the 20 sales, according to data compiled by Bloomberg.
Hong Kong’s 87 offerings raised about 10 times as much.
Hutchison said it is listing the new port company in
Singapore because trusts can’t be traded on Hong Kong’s exchange.
It may eventually offer units in its home city if regulations
change, it said. The company opted for a trust structure because
of the asset’s stable cashflow and growth potential, it said.
PSA International Pte, the terminal operator controlled by
Singapore’s Temasek Holdings Pte, also owns a stake in
Hutchison’s main port unit.
Cash Cow
The assets in the trust made an operating profit of HK$5.3
billion ($681 million) on sales of HK$10.3 billion in 2009,
according to the statement. That’s an operating margin of 51
percent. The company had a 60 percent market share in Hong
Kong’s Kwai Tsing port and a 47 percent share in Shenzhen in the
period, it said.
“Hong Kong is a cash cow,” said Johnson Leung, an analyst
at Tufton Oceanic Far East Ltd. The trust plan is “a very
positive move to gradually unlock asset value.”
Cosco Pacific Ltd., the container-terminal arm of China’s
largest shipping group, trades at about 15 times estimated
earnings, according to data compiled by Bloomberg. China
Merchants Holdings (International) Co., which has stakes in
ports moving about a third of China’s containers, trades at
about 21 times. Both companies are listed in Hong Kong.
Container traffic in Hong Kong rose 12 percent last year to
23.5 million boxes, according to preliminary figures from the
city’s Port Development Council. Volumes in Shanghai surged 16
percent to 29.1 million, as the port surpassed Singapore as the
world’s busiest, according to city government figures. Traffic
in Shenzhen jumped 25 percent to 20.7 million in the first 11
months, based on data from the Municipal Statistics Bureau.
Sea-cargo traffic in China, Vietnam, India and other
emerging markets may grow 7 percent annually through 2015,
according to A.P. Moeller-Maersk A/S, operator of the world’s
largest container-shipping line.
Hutchison’s terminal unit, Hutchison Port Holdings Ltd.,
has interests in 308 berths in 51 ports across 25 countries,
according to the statement.
To contact the reporter on this story:
Kyunghee Park in Singapore at
kpark3@bloomberg.net
To contact the editor responsible for this story:
Neil Denslow at
ndenslow@bloomberg.net