Li prices utility IPO cheaply to lift interest
Print Edition
Tycoon Li Ka-shing made the initial public offering of a Hong Kong utility as cheap as he could, seeking to bolster investor appetite as he considers whether to sell shares in another Li company in what could be the world’s biggest-ever retail IPO.
Defying a reputation among Hong Kong investors for selling assets at peak valuation, Asia’s richest man yesterday priced HK Electric Investments Ltd’s sale at US$3.1 billion, the bottom of a targeted range. In last year’s original plans, the utility investment trust controlled by Li’s Power Assets Holdings Ltd was expected to raise up to US$5.7 billion.
After two companies in his conglomerate lost about a third of their value since their 2011 IPOs, Li’s choice reflects a need to restore the Hong Kong market’s confidence. The 85-year-old is reviewing strategy options that include a possible listing that could value retailer AS Watson Co at about US$23 billion, raising funds to fuel a major drive in health and beauty products in China.
The sale of HK Electric, which owns the utility that brought electricity to the city in 1890, is still the biggest IPO in Asia excluding Japan since the US$3.6 billion listing by People’s Insurance Group of China Co in November 2012. Power Assets will use proceeds from the spinoff for expansion overseas.
“Building a relationship with the market is important” for a Watson deal later in the year, said an equity capital markets banker in Hong Kong who is familiar with the deal but not authorized to speak publicly on the matter. “This IPO needs to trade up. People need to feel good about buying Li Ka-shing deals.”
The regulated, low-growth environment of the utility sector is far-removed from the kind of interest the man dubbed “Superman” in Hong Kong will hope to drum up in a potential Watson IPO in what’s set to be a marquee year for Hong Kong bankers.
Advisory firm PwC estimates Hong Kong IPOs could raise US$32.2 billion in 2014, the highest since 2010 and nearly double the 2013 tally of US$17.1 billion.
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