Hutchison unit sets price range for $5.8 billion IPO

Hutchison Whampoa's ports unit is looking to raise as much as $5.8 billion in an initial public offering (IPO) in Singapore, allowing investors to tap into China's booming infrastructure business.

Southeast Asia's biggest ever listing comes at a time when intra-Asia sea-borne trade is swelling and global container shipping firms are putting more ships and resources to serve Asian routes from Europe and North America.

The assets of the Hutchison subsidiary, 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 twenty-foot equivalent units, according to the IPO prospectus.

It would be the first publicly traded business trust backed by port assets, according to the prospectus, and would exceed Malaysia's Petronas Chemicals' (PCGB.KL) $4.1 billion listing of 2010, which has so far been the biggest listing in the region.

Given the size of HPH Trust, we expect the proposed IPO to attract significant investor interest, said Sean Quek, Singapore head of research at Credit Suisse.

In addition to the potential direct impact on trading volume, the IPO could also set the path for business trusts and port-related companies' listings here.

INDICATIVE PRICE

Hutchison, the world's largest container terminal operator, is owned by Hong Kong tycoon Li Ka-shing, who is spinning off Hutchison Port Holdings Trust in a separate listing in Singapore to take advantage of regulations that are favorable for trust-like companies.

The company chose Singapore over Hong Kong because the city-state has been an attractive destination for infrastructure and real estate trusts, bankers said.

The company reported a net profit of $655 million in 2010, from a revenue of $1.49 billion.

Similar trusts have been lapped up by investors who seek a higher dividend yield and want to diversify from bonds.

Singapore is home to property trusts owned by Southeast Asia's biggest property firm CapitaLand (CATL.SI) as well as shipping, infrastructure and logistics' trusts from China to Australia.

Hutchison has set an indicative price of $0.91 to $1.08 per unit for the IPO, aiming to raise $4.2 billion through the sale share.

The proceeds will be used to pay off debt and for development of two ports' projects in China.

PAULSON AND TEMASEK

Cornerstone investors, who include Singapore state investor Temasek Holdings TEM.UL, U.S. hedge fund manager Paulson & Co and Cathay Life Insurance, will be putting in an additional $1.6 billion in the deal, according to its preliminary prospectus.

Based on the maximum indicative price, the market cap of the company will be $9.4 billion after the listing, which is likely to be within a few weeks.

Hutchison Whampoa and Singapore state-owned PSA International, which owns 20 percent of the Hong Kong firm, will together own 32 percent of the company after the listing.

The units will offer a yield of between 5.5 percent to 6.5 percent to unit holders, according to the prospectus.

Paulson will invest $350 million in the IPO, whereas a Temasek unit will put in $100 million.

DBS (DBSM.SI), Deutsche Bank (DBKGn.DE) and Goldman Sachs (GS.N) are joint bookrunners and issue managers.

JPMorgan (JPM.N), UBS (UBSN.VX), Barclays (BARC.L), Morgan Stanley (MS.N) are among co-lead managers.