Hutchison Whampoa Ltd, controlled by billionaire Li Ka-shing, is seeking $5.83 billion from the sale of some Hong Kong and mainland port assets in what may be Singapore's biggest initial public offering.

The world's largest operator of container terminals is offering about 5.4 billion units in a trust at a price of $91 cents to $1.08 each, according to a term sheet. The company announced plans for the sale last month.

The assets of the trust, 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 20-foot equivalent units, according to the IPO prospectus.

Cornerstone investors led by Capital Research & Management Co and Paulson & Co will invest $1.62 billion in the IPO, Hutchison said in a statement released Monday, as China's growing exports fuel container-shipping volumes. The sale could surpass the $4 billion raised in Singapore Telecommunications Ltd's 1993 IPO and the total amount raised in Singapore IPOs last year.

"The asset held by the trust are good because of the increasing trade that will come globally and within Asia," said Daphne Roth, head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion in the region.

The trust will own assets including container terminals in Hong Kong and neighboring Guangdong province. Hutchison will manage the trust and retain a 25 percent stake, the conglomerate said earlier. The trust will have a total market value of as much as $9.4 billion, according to Monday's statement.

Capital Research will invest $634 million in the offering, according to the term sheet. Paulson & Co, managed by John Paulson, will buy a $350 million stake and Lone Pine Capital LCC will invest $186 million, it said.

Jenkin Hui and family, Singapore's Temasek Holdings Pte, Cathay Life Insurance Co and Metropolitan Financial Services Ltd will each invest $100 million, and Ally Holding Ltd will buy a $50 million stake.

Hutchison rose 1.9 percent to HK$91.70 at the close of trading in Hong Kong on Monday. The company, which also invests in real estate, oil and gas, drugstores and mobile-phone services, has jumped 15 percent this year, outperforming the benchmark Hang Seng Index's 1.4 percent gain.

Singapore's benchmark Straits Times Index has fallen 5.2 percent this year as political instability in the Middle East and North Africa boosts oil prices. The share slump may damp investor demand for the Hutchison Port sale, said Francis Lun, general manager at Fulbright Securities Ltd in Hong Kong.

"It may be a little too big for the current market conditions," he said. "Rising oil prices have been causing global markets to fall."

Hutchison opted to sell the port assets in Singapore as business trusts can't be listed in Hong Kong. The company chose a trust structure because of the assets' stable cash flow and growth potential, it said in January.

"It will be interesting to see how Hutchison 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 percent to 6.5 percent to unit holders, is lower compared to an average of around 7 percent 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 percent of the current price range will be seen as more attractive."

Hutchison Port Holdings Trust reported a net profit of $655 million in 2010, from a revenue of $1.49 billion.

Aside from Hutchison Port Holdings Trust, Hutchison Whampoa operates its other port businesses through its main port arm, Hutchison Port Holdings Ltd, which has interests in 308 berths in 51 ports across 25 countries.

China Daily - Agencies

(HK Edition 03/01/2011 page2)