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 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.