Hong Kong tycoon Li Ka-shing's ports unit is looking to raise as much as $5.8 billion in its Singapore IPO, seeking to cash in on a recovery in global trade and provide investors with access to China's booming infrastructure business.
The listing, Southeast Asia's biggest ever, comes at a time when sea-borne trade in Asia is swelling and global container shipping firms are putting more ships and resources to serve Asian routes from Europe and North America.
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The capital-raising could provide additional ammunition for Li, Asia's richest man, who is looking to make a big play on UK power assets through his Cheung Kong Infrastructure (CKI) unit.
The deal has attracted big names including Singapore state investor Temasek Holdings , U.S. hedge fund manager Paulson & Co and Cathay Life Insurance, who will be putting in $1.6 billion as Co as cornerstone investors, according to the preliminary prospectus.
The assets of the Hutchison's subsidiary, Hutchison Port Holdings Trust, are located in Hong Kong and Shenzhen, two of the world's busiest container ports in 2009 with a total throughput of 39.2 million twenty-foot equivalent units, the prospectus showed.
It would be the first publicly traded business trust backed by port assets, according to the prospectus, and would exceed Malaysia's Petronas Chemicals' $4.1 billion listing of 2010, which has so far been the biggest listing in the region.
"Given the size of HPH Trust, we expect the proposed IPO to attract significant investor interest," said Sean Quek, Singapore head of research at Credit Suisse.
"In addition to the potential direct impact on trading volume, the IPO could also set the path for business trusts and port-related companies' listings here."
YIELD VS REITS
Hutchison Whampoa , the world's largest container terminal operator, is spinning off Hutchison Port Holdings Trust in a separate listing in Singapore to take advantage of regulations that are favourable for trust-like companies.
With operations in 53 countries and approximately 220,000 employees worldwide, Hutchison has five core businesses -- ports and related services; property and hotels; retail; energy, infrastructure, investments and others; and telecommunications.
The company chose Singapore over Hong Kong because the city-state has been an attractive destination for infrastructure and real estate trusts, bankers said.
"It will be interesting to see how Hutch puts the money to work - does it repay debt, does it acquire utility businesses at reasonable valuations��or does it venture into something as risky and expensive as 3G?," said Jacob Samuel, credit analyst at Nomura.
The yield from the offering of between 5.5% to 6.5% to unit holders, is lower compared to an average of around 7% offered by Singapore-listed business and property trusts.
"It is not attractive at this price range," said William Lo, an analyst from Ample Capital. "A discount of 20% of the current price range will be seen more attractive."
Hutchison Port Holdings Trust reported a net profit of $655 million in 2010, from a revenue of $1.49 billion.
Similar trusts have been lapped up by investors who seek a higher dividend yield and want to diversify from bonds.
Singapore is home to property trusts owned by Southeast Asia's biggest property firm CapitaLand as well as shipping, infrastructure and logistics' trusts from China to Australia.
Based on the maximum indicative price, the market cap of the company will be $9.4 billion after the listing, which is likely to take place on March 18, according to a source with knowledge of the deal.
Hutchison Whampoa and Singapore state-owned PSA International, which owns 20 percent of the Hong Kong firm, will together own 32 percent of the company after the listing if overallotment is exercised.
Paulson will invest $350 million in the IPO, whereas a Temasek unit will put in $100 million.
DBS , Deutsche Bank and Goldman Sachs are joint bookrunners and issue managers.
JPMorgan , UBS , Barclays , Morgan Stanley are among co-lead managers.