WH Group Said to Plan Lower Valuation for $2.36 Billion IPO

WH Group Ltd., the world’s biggest pork producer, plans to seek a valuation of about 11.5 times estimated 2014 earnings for its $2.36 billion Hong Kong initial public offering, said people with knowledge of the matter.

WH Group plans to offer as many as 2.95 billion shares at HK$6.20 each, including a so-called greenshoe option, said the people, who asked not to be identified because the information is private. The company sought a valuation of at least 15 times earnings in its previous IPO attempt in April, when it was seeking to raise as much as $5.3 billion, a person familiar with the matter said at the time.

The Chinese owner of Smithfield Foods Inc. is selling shares in Hong Kong after cutting the number of main bookrunners on the deal to two, from a record 28 in its last attempt. The company canceled its April IPO even after reducing the size of the deal by about two-thirds.

WH Group will raise about $2.05 billion in the IPO if the greenshoe, or overallotment, option isn’t exercised, according to the people. The company is offering shares at a fixed price after it accepted the lower valuation demanded by investors for the revived sale, one of the people said.

The benchmark Hang Seng Index has gained 5.4 percent since April 29, when WH Group canceled its previous share sale. A Hong Kong-based external spokesman for the company declined to comment on the IPO.

Smithfield Acquisition

Henan Shuanghui Investment & Development Co., a meat processing unit of WH Group, trades at 15 times estimated 2014 profit in Shenzhen, according to data compiled by Bloomberg. Tyson Foods Inc., the largest U.S. meat producer, trades at 13.3 times this year’s estimated profit while JBS SA, based in Sao Paulo, is valued at 12.1 times, the data show.

In September, WH Group bought Smithfield Foods, the biggest U.S. pork producer, at 12.9 times its estimated profit for the year ended April 2014, according to the data.

The Chinese company plans to use the IPO proceeds to repay part of a $4 billion syndicated loan that funded the Smithfield deal, which was the largest Chinese purchase of a U.S. firm, according to its IPO prospectus. WH Group changed its name from Shuanghui International Holdings Ltd. in January.

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