Billionaire Li Ka-shing’s Retail Business Watson IPO May Hit $6 Billion

Watson IPO May Hit $6 Billion
Billionaire Li Ka-shing’s Retail Business to List in Hong Kong, London by End of June
PRUDENCE HO And P.R. VENKAT
Updated March 18, 2014 3:32 p.m. ET
Hong Kong billionaire Li Ka-shing’s retail flagship plans to list in both Hong Kong and London by the end of June, people familiar with the situation said Tuesday, in what could be one of the world’s largest initial public offerings since late 2012.

A.S. Watson & Co.—which owns drugstore chains including Watsons in Asia and Superdrug and Kruidvat in Europe, as well as supermarkets in Hong Kong and electronics shops globally—could raise between US$5 billion and US$6 billion from its dual-city IPO, one of the people said. It plans to submit a listing application to the Hong Kong stock exchange as early as this week, the person said.
The company, the retail subsidiary of Mr. Li’s Hutchison Whampoa 0013.HK +1.59% Ltd., is also considering a secondary listing in Singapore if the Hong Kong and London IPOs go well, the people said.
A Hutchison spokeswoman declined to comment on the potential listing plan but said the company is continuing with its strategic review of Watson, which includes an IPO of all or parts of the businesses.
If it raises $6 billion, the IPO would be the biggest since Japan Airlines Ltd.9201.TO +0.10% raised $8.5 billion in Tokyo in September 2012, according to Dealogic. Chinese e-commerce company Alibaba Group Holding Ltd. plans to pursue a U.S. listing that could raise more than US$15 billion, people familiar with the situation said earlier, though it is unclear when that would take place.
The 85-year old Mr. Li, Asia’s richest man, said last month he planned to list his global retail business in Hong Kong and one other venue. That follows a Hong Kong IPO in January of his Hong Kong electricity assets, which raised US$3.11 billion, and a Singapore listing in 2011 of his port assets, which raised US$5.5 billion.
The billionaire, who has been buying as well—he has picked up utility assets in Europe such as the U.K.’s electricity-distribution networks—also attempted a sale of ParknShop, the supermarket chain he holds through his Watson unit, to buyers that included Australia’s Woolworths WOW.AU +0.08% Ltd. He scrapped that after failing to get the $3 billion to $4 billion he sought.
By submitting a listing application to Hong Kong’s stock exchange before the beginning of April, Watson avoids new rules coming into effect in the city that month which require a draft listing document to be published online along with an application. Currently in Hong Kong, companies that seek listing approval can do so without disclosing their intentions publicly, so that if they are rejected, investors won’t know.
Hutchison joins a string of companies seeking listings before the new rules are implemented. These include auto dealer China Grand Automotive Services Co., which is seeking to raise up to US$1 billion, and WH Group Ltd., which under its former name, Shuanghui International Holdings, bought U.S. pork producer Smithfield Foods last year. WH Group is expected to raise US$5 billion in April and is seeking to get listing approval later this month.
Watson, which has been valued by analysts at more than US$20 billion, is closely working with Bank of America Merrill Lynch, HSBC Holdings HSBC -0.22% Ltd. and Goldman Sachs Group Inc. GS +0.75% on the IPO, people familiar with the situation said earlier.
Hutchison is planning to open more than 1,200 new stores globally this year. As of the end of last year, Watson had around 10,500 stores in 25 markets across Europe, Greater China and Southeast Asia.
Last year, Watson reported an 11% increase in earnings before interest expenses and other finance costs, tax, depreciation and amortization. The total rose to 14.2 billion Hong Kong dollars (US$1.8 billion), driven by new store openings.
The Watson IPO might help Hong Kong keep its status as one of the world’s top listing sites, even though it missed out on Alibaba’s IPO. Hong Kong was the world’s No. 2 IPO market in 2013, ranking behind the New York Stock Exchange, according to data provider Dealogic. Hong Kong bounced back after slipping to fourth place in 2012, following three years at No. 1.
Among IPOs set for Hong Kong besides Watson and WH Group are a US$2 billion offering by BAIC Motor, a Chinese car maker partly owned by Daimler AG; and a US$2 billion IPO by China General Nuclear Power Corp., the country’s biggest nuclear-energy company by installed capacity.