Bloomberg News

World’s Biggest Pork Supplier to Spawn China Billionaire

July 31, 2014

WH Group Chairman And CEO Wan Long

WH Group Ltd. Chairman And Chief Executive Officer Wan Long. Photographer: Jerome Favre/Bloomberg

Wan Long, who runs the world’s biggest pork supplier, will become a billionaire when his company WH Group Ltd. (288) completes an initial public offering in Hong Kong.

WH Group is set to raise at least $2.05 billion, based on data in its IPO prospectus. The company received enough orders for its sale of 2.57 billion shares at HK$6.20 each, people with knowledge of the matter said.

The share sale comes as demand is expected to pick up for the meat industry in China in the second half. Wan owns 9.1 percent of the Luohe, China-based meat packer through two holding companies, Sure Pass and Rise Grand. The stake is valued at more than $1 billion, based on data in the IPO prospectus.

“There should be a recovery in demand because of holidays like the Mid-Autumn Festival and National Day,” said Tommy Xiao, an analyst at agricultural researcher Shanghai JC Intelligence Co., referring to key holidays in September and October. “There is optimism for meat prices up until the Spring Festival next year.”

Born in 1940, Wan joined WH Group’s predecessor Luohe Cold Storage in 1968, a decade after the state-owned company was founded in central China’s Henan province. He became the head of the factory in 1984, according to its prospectus.

Debt Repayment

The company is raising money to repay part of a $4 billion loan that funded its purchase of Smithfield Foods Inc., the biggest Chinese acquisition of a U.S. firm. WH Group revived the share sale this month, after scrapping plans to raise as much as $5.3 billion in April.

The share sale is taking place as a meat scandal erupted in China. Companies including Starbucks Corp. (SBUX:US) and KFC and Pizza Hut owner Yum! Brands Inc. (YUM:US) have cut ties with food-processing giant OSI Group, after a Chinese television station discovered workers at an OSI subsidiary in Shanghai repackaging and selling expired meat to its restaurant customers. McDonald’s Corp., a longtime OSI partner, pulled beef, pork and chicken items from its Chinese restaurants.

“There were also concerns earlier that the meat scandals in China might affect institutional demand for WH Group’s shares,” Xiao said, adding that investor subscription for the stock exceeded expectations, “so that is quite OK.”

Fund managers placed orders for at least double the amount of stock available to them, according to the people, who asked not to be identified because the information is private. Individual investors subscribed for more than 55 times the number of shares in that portion, which accounted for 5 percent of the offering, the people said.

The share sale would value WH Group at $11.4 billion, about 11.5 times its estimated 2014 profit, the people said. Benny Liu, a Hong Kong-based external spokesman for WH Group, declined to comment on the report.

BOC International Holdings Ltd. and Morgan Stanley are arranging the offering, according to the prospectus.

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net; Sterling Wong in Singapore at swong470@bloomberg.net

To contact the editors responsible for this story: Peter Newcomb at pnewcomb2@bloomberg.net Linus Chua, Madelene Pearson


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