Hutchison Whampoa Ltd. (13), controlled by Asia’s richest man Li Ka-shing, picked Bank of America Corp. (BAC), Goldman Sachs Group Inc. and HSBC Holdings Plc (HSBA) to work on an initial public offering of its retail arm, said two people with knowledge of the matter. The stock rose.
A.S. Watson & Co., which runs stores including groceries and pharmacies in 33 markets, would be valued at more than $20 billion in an IPO, said one of the people, who asked not to be identified because the details are private. The company plans to sell shares in Hong Kong and may pursue a secondary listing in London, the other person said.
Shares of Hutchison rose as much as 3.5 percent to the highest in almost 13 years on optimism a Watson IPO would free up money to invest in faster-growing industries. The stock has climbed 28 percent this year, outperforming the benchmark Hang Seng Index’s 2.5 percent gain.
“Hutchison is moving faster toward the A.S. Watson IPO,” Steven Leung, a director at UOB-Kay Hian Holdings Ltd., said by phone today. “The spinoff would help unlock a much more attractive valuation for Hutchison.”
Hutchison in October scrapped plans to sell its ParknShop supermarket chain, which is part of the Watson division, after failing to draw high enough offers. It will review options for Watson including a public offering, Hutchison said at the time.
Bank of America and Goldman Sachs managed the attempt to sell ParknShop.
Sky News reported Hutchison’s choice of banks for the IPO earlier today. Jeremy Lau, a Hong Kong-based spokesman for Hutchison, said the company had not decided on the time and place for a possible Watson IPO and declined to comment on the choice of investment banks.
Watson runs more than 11,000 stores, including Superdrug pharmacies in the U.K. and Rossmann drugstores in Germany in addition to its namesake outlets in Asia, according to its website. The company, which also operates retail stores that sell beverages, wines and electronics, posted sales of HK$148.6 billion ($19.2 billion) last year, with earnings before interest and tax of HK$10 billion, according to Hutchison’s annual report.
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