Power Assets Holdings Ltd. (6), controlled by Asia’s richest man, Li Ka-shing, is seeking to raise as much as $5 billion by selling units in its Hong Kong electricity arm, two people with knowledge of the plan said.
Power Assets plans to sell as much as a 70 percent stake in the division through a business trust structure, the company said in a statement to the Hong Kong stock exchange yesterday. That may be worth $5 billion, said the people, who asked not to be identified because the details are private.
A $5 billion sale would be the biggest initial public offering in Hong Kong since October 2010, when AIA Group Ltd. (1299) raised $20.4 billion, according to data compiled by Bloomberg. Li is selling assets in the former British colony, where growth is slowing, as he pursues acquisitions in Europe.
“Li Ka-shing is cashing out in a relatively good market, which is consistent with his divestment strategies,” Ronald Wan, chief China adviser at Asian Capital HK Co., said by phone yesterday. “He may want to seek overseas assets with higher growth rates as the Hong Kong electricity unit is a stable and mature business.”
Proceeds from the spinoff will enable Power Assets to pursue acquisitions in the global power industry, it said in the statement. Li’s Hutchison Whampoa Ltd. (13) may exit its ParknShop supermarket chain in Hong Kong, while buying Telefonica SA (TEF)’s Irish unit.
The spinoff is a commercial decision and shouldn’t be seen as a withdrawal of capital from Hong Kong, Power Assets said in a separate statement yesterday.
IPOs are staging a recovery in Hong Kong after the benchmark Hang Seng Index (HSI) climbed 17 percent from this year’s low in June. The value of IPOs in the city reached $7.8 billion this year, poised to surpass the $8 billion for the whole of 2012, according to data compiled by Bloomberg.
“Investor sentiment seems to have improved for Hong Kong IPOs as compared with the first half of the year when primary equity activity in the region was all about Southeast Asia,” said Philippe Espinasse, former head of equity capital markets for Asia at Nomura Holdings Inc. and author of “IPO: a Global Guide.”
Goldman Sachs Group Inc. and HSBC Holdings Plc are joint sponsors for the listing. The Hong Kong stock exchange has approved the spinoff, which is conditional on approvals from shareholders and the listing committee.
IFR Asia reported the size of the sale earlier yesterday.
Hongkong Electric, which started operations in 1890, provides electricity to about 568,000 customers. The company, one of two major power suppliers in the city, reported a profit of HK$4.5 billion ($580 million) in 2012 and had a net asset value of HK$5.6 billion as of Dec. 31, according to the statement.
Outside of Hong Kong, Power Assets has interests in assets from gas distribution to wind farms in the U.K., Australia, China, New Zealand, Thailand, Canada and the Netherlands.
Earnings from the company’s power assets outside of Hong Kong surged to HK$5.1 billion last year, from HK$700 million in 2007, it said.
Power Assets has partnered with other companies controlled by Li to acquire assets in Europe. It took part in a bid to buy Dutch waste processor AVR-Afvalverwerking BV for 943.7 million euros ($1.3 billion) in June.
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