HONG KONG â€" WH Group, a Chinese company that is the world’s biggest pork producer, plans to raise more than $5 billion in a Hong Kong share sale that would be the largest initial public offering in a year.
WH is the new name for the combined businesses of China’s Shuanghui International, which paid $4.7 billion in cash last year for Smithfield Foods, the biggest pork producer in the United States. That deal was the biggest Chinese acquisition of an American company.
On Thursday, WH began formally marketing its I.P.O. to investors as it sought to raise between 29.3 billion Hong Kong dollars and 41.2 billion dollars, or between $3.8 billion and $5.3 billion, according to a copy of a term sheet for the offering seen by DealBook. The I.P.O. will value the company at $15.1 billion to $21.2 billion.
China is the world’s biggest producer and consumer of pork, but production costs there are high because of relatively higher prices for grain and feed and less efficient farming practices. With its recently acquired American unit, WH is seeking to meet growing Chinese demand by increasing imports of chilled and frozen American pork.
If priced at the top of the range, at $5.3 billion, WH’s I.P.O. would be the world’s biggest since April 2013, when the Brazilian insurer BB Seguridade Participacoes raised $5.7 billion in its listing on the São Paulo, Brazil, stock exchange, according to data from Dealogic.
WH is selling 3.66 billion shares to be priced between 8 Hong Kong dollars and 11.25 dollars, according to the term sheet. Approximately 80 percent of the deal will be new shares, with 20 percent of the offering coming from existing shareholders who are selling down.
The term sheet was unclear on which shareholders were selling. WH’s biggest shareholders include CDH Investments, a large Chinese private equity group, and the company’s management. Goldman Sachs and the Singapore state, investor Temasek Holdings, also have stakes.
The plans include an option for WH to enlarge its share sale by 20 percent of the base deal, all of which would come from existing shareholders. Another provision for a further over-allotment option would allow the underwriters to sell additional existing shares representing 15 percent of the base deal in the first few weeks after trading in the stock begins.
The I.P.O. values WH at 15 to 20.8 times the company’s estimated earnings for 2014. That is a richer valuation than the 14 times earnings that Shuanghui paid last year for Smithfield, a transaction worth $7 billion, if Smithfield’s debt is taken into account.
WH’s offering includes an unprecedented 28 underwriters, compared with the previous record of 21 banks hired by China Galaxy Securities for its I.P.O. in May 2013. Morgan Stanley, Bank of China International, Citic, UBS, Standard Chartered, Goldman Sachs and DBS are the leading underwriters of the I.P.O.
Morgan Stanley, Bank of China and Citic advised Shuanghui on the Smithfield acquisition last year, while Bank of China provided financing for that deal.
