Hutchison Whampoa Falls Most in 2.5 Years on Watson Sale

Asia's Richest Man Li Ka-shing
Billionaire Li Ka-shing, chairman of Cheung Kong Holdings Ltd. and Hutchison Whampoa Ltd. Hutchison will pay a special dividend of HK$7 a share after the sale, which values Watson at about HK$177 billion, the Hong Kong-based company said in a statement. Photographer: Lam Yik Fei/Bloomberg

March 24 (Bloomberg) -- Hutchison Whampoa Ltd., controlled by Asia’s richest man Li Ka-shing, fell the most in more than two years after the company agreed to sell a 25 percent stake in its retail arm to Temasek Holdings Pte for HK$44 billion ($5.7 billion).

Hutchison Whampoa closed 5.1 percent lower at HK$101.60, its biggest decline since Oct. 18, 2011, in Hong Kong trading. The city’s benchmark Hang Seng Index gained 1.9 percent.

The stake sale, announced March 21, indicated a valuation for retail arm A.S. Watson & Co. that was lower than expected, according to analysts at JPMorgan Chase & Co., Credit Suisse Group AG and Morgan Stanley. Li also said the two companies will seek to list A.S. Watson in two to three years, changing a plan for an initial public offering this year.

“The IPO catalyst is now put on hold, thereby potentially leading to some near-term selling pressure,” Benjamin Lo, an analyst at Nomura International based in Hong Kong, wrote in a research note published today.

Hutchison will pay a special dividend of HK$7 a share after the sale, which values Watson at about HK$177 billion, the Hong Kong-based company said in a statement.

“The company is suggesting limited acquisition opportunities” by paying the special dividend, Praveen Choudhary, a Hong Kong-based analyst at Morgan Stanley, wrote in a research note today. Morgan Stanley downgraded the stock to equalweight from overweight and cut its share-price estimate to HK$108 from HK$116.

Cheung Kong

Cheung Kong Holdings Ltd., Hutchison’s biggest shareholder, said it will pay a special dividend totaling HK$16.2 billion after receiving the payout. The developer gained 0.2 percent to close at HK$123.10 in Hong Kong trading.

Temasek will appoint two directors at Watson’s board, said Li, who wouldn’t rule out the Singapore state-owned investment company increasing its stake in Watson in the future.

The deal gives Temasek a stake in a business with more than 10,000 stores worldwide. Hutchison gains funds as it expands in Europe and North America while reducing assets in Hong Kong and China.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net Tan Hwee Ann