HPH Trust – BT

US$6b Hutchison port IPO to berth at S'pore

Outfit controlled by Li Ka-shing plans mega SGX listing that could dwarf even SingTel's '93 debut

In what could trump SingTel's record-setting initial public offering (IPO), Hong Kong-listed Hutchison Whampoa announced yesterday that it plans to spin off its port assets in Hong Kong and China into a separate listing on the Singapore Exchange (SGX).

According to reports, the listing of Hutchison Port Holdings Trust (HPH Trust) aims to raise as much as US$6 billion. This is more than the entire amount raised on the SGX in 2009 – S$3.1 billion.

Hutchison Whampoa – the biggest container terminal operator in the world – is controlled by billionaire Li Ka-shing.

If the IPO goes through, it will dethrone SingTel's 1993 IPO, which raised about S$4 billion, in the proceeds stakes.

The trust will operate and develop deep-water container ports in Guangdong, Hong Kong and Macau.

Its portfolio will encompass Hutchison Whampoa's entire interests in its subsidiaries which include Hongkong International Terminals (HIT) – the owner and operator of Terminals 4, 6, 7 and two berths in Terminal 9 at Kwai Tsing in Hong Kong – as well as Cosco-HIT, the owner and operator of Terminal 8 East, also at Kwai Tsing.

In 2005, PSA International bought a 20 per cent stake in both HIT and Cosco-HIT for US$925 million in cash, as part of its strategy to gain a foothold in Hong Kong.

While HPH Trust's IPO might be Singapore's largest if the US$6 billion figure is borne out, the Hutchison ports business represented a superlative of another kind for Singapore in 2006.

That year, PSA International made what was its biggest ever investment – paying US$4.4 billion for one-fifth of Hutchison Whampoa's port network, which made it a holder of substantial minority interest.

'PSA International is in full support of the establishment of this new entity and its proposed public listing,' said Fock Siew Wah, group chairman of PSA International.

'It believes that the listing of the HPH Trust will best meet the growing needs of Hutchison Port Holdings' global port operations and satisfy, at the same time, the needs of the international institutional investors and the general investing public for good investment grade business trust stocks.'

Coincidentally, PSA group chief executive Eddie Teh – whom BT learned yesterday is due to retire in August – was formerly an executive with Hutchison.

For Hutchison Whampoa, this spin-off and listing will make sense.

'It's capitalising future gains and selling them to the market,' said Roger Tan, vice president of SIAS Research.

A formal application to spin off the trust was made to the Hong Kong Stock Exchange last Friday. The Hong Kong bourse's policy of allowing only real-estate investment trusts to list might have propelled HPH Trust into seeking a listing on the SGX, which does not have a similar restriction.

Speaking to the media and analysts at the SGX's Q2 earnings briefing yesterday, the exchange's chief executive officer, Magnus Bocker, declined to comment on whether competition for the listing had been great amongst exchanges. 'We are very proud that they have made the choice to come to Singapore,' said Mr Bocker.

According to the Wall Street Journal, people close to the deal said that the IPO could be launched either in late-February or early-March if it gets all the necessary approvals. Other estimates have pegged the launch date closer to the end of March or early-April.

If the deal goes through, Hutchison Whampoa will hold 25 per cent of the trust's units.

Others, however, have expressed scepticism at the reported aim of raising US$6 billion in IPO proceeds in a market like Singapore's.

'How much did SingTel raise?' one industry analyst asked incredulously when asked about the possibility of drawing US$6 billion from the IPO. 'I'm not sure there will be enough subscriptions to soak up such a large issue. It would depend on how much is floated.'