HONG KONG â€" Li Ka-shing, Asia’s richest man, has called off plans for a Hong Kong and London listing of his retail business after striking a deal on Friday to sell a stake in the unit to a Singaporean state investment company for nearly $6 billion.
Mr. Li’s Hutchison Whampoa announced it would sell a 25 percent stake in A.S. Watson, which operates a global network of more than 10,000 supermarkets and health and beauty stores, to Temasek Holdings of Singapore for 44 billion Hong Kong dollars, or $5.7 billion.
The deal values Watson at a hefty 177 billion Hong Kong dollars, and Hutchison said it would use 70 percent of the net proceeds from the sale to pay out a special dividend of 7 Hong Kong dollars per share to its shareholders. Mr. Li’s flagship group, Cheung Kong Holdings, controls 52 percent of Hutchison â€" meaning it is set to pocket about $2 billion in dividend payments, which are tax-free in Hong Kong.
Mr. Li, whom Forbes ranks as the 20th richest person in the world with a net worth of $31 billion, had considered a dual listing for Watson that analysts expected would be one of the world’s biggest initial public offerings of the year. But the billionaire’s recent attempts to divest other businesses by selling them outright or spinning them off in stock market listings have been met with lukewarm reception. Investors appear to have grown wary of diving in when Mr. Li, renowned locally as a savvy asset trader, is selling.
In January, Mr. Li’s Hong Kong Electric Investments priced its Hong Kong I.P.O. at the bottom of the marketed range, raising 24.1 billion Hong Kong dollars, or $3.1 billion. The deal had been downsized from earlier estimates of as much as nearly $6 billion because of lackluster reception from investors during the preliminary marketing phase, and the shares are 10 percent below their offering price.
By forgoing an I.P.O. of Watson in favor of selling a strategic stake to Temasek, Mr. Li has simultaneously avoided the risk of having another listing underperform, allied himself with a deep-pocketed supporter and locked in a strong valuation for the retail business.
The valuation of Watson implied by the deal is equal to about 40 percent of Hutchison’s market capitalization â€" for a retail business that accounted for only 18 percent of Hutchison’s 65 billion Hong Kong dollars in pretax earnings last year.
‘‘We are pleased to have Temasek, a renowned international investor, as our long-term partner,’’ Hutchison’s group managing director, Canning Fok, said Friday in a statement. ‘‘This demonstrates their confidence in the growth opportunities and prospects of our retail businesses.’’
Chia Song Hwee, the head of Temasek’s investment group, said: ‘‘We share their philosophy to invest and build businesses for the long term, especially in Asia. A.S. Watson is a well-established company with a proven management team, a valuable franchise and a good growth story. The consumer retail sector is a good proxy to growing middle income populations and transforming economies.’’
The deal means immediate plans for a Watson I.P.O. are off, but Hutchison said it and Temasek had “agreed to work together towards listing the retail division at a suitable time.â€
Bank of America Merrill Lynch, DBS, Goldman Sachs and HSBC acted as advisers to Hutchison on the deal.
