Smithfield owner Shuanghui hires banks for up to $6 billion HK IPO

Meat products of Shuanghui (Shineway) Group are seen on display on a shelf at a supermarket in Wuhan

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Meat products of Shuanghui (Shineway) Group are seen on display on a shelf at a supermarket in Wuhan, Hubei province May 31, 2013. REUTERS/Stringer

By Fiona Lau and Elzio Barreto

HONG KONG (Reuters) - China's Shuanghui International Holdings, which bought U.S. pork producer Smithfield Foods Inc this year, has hired banks for a Hong Kong IPO, seeking to raise up to $6 billion (3.7 billion pounds) in what could be the region's largest stock offering in four years.

The potential size of a deal is subject to change. While one source familiar the matter said it could go as high as $6 billion, another said it was more likely to be in the $3-4 billion range.

An IPO would allow Shuanghui to pay down debt borrowed for the $4.7 billion Smithfield purchase and provide an exit for investors such as CDH, one of China's biggest and oldest private equity firms which has long aimed to sell its stake in the company.

The listing, expected in the second quarter of 2014, would be a major boost for the Hong Kong stock exchange, which has seen public offering volumes drop over the last two years and has missed out on a potential $15 billion IPO for Chinese e-commerce firm Alibaba Group Holding Ltd (ALIAB.UL).

Shuanghui has tapped BOC International, Citic Securities International , Goldman Sachs (NYS:GS), Morgan Stanley (NYS:MS), Standard Chartered (LSE:STAN) and UBS (VTX:UBSN) to lead the IPO, sources familiar with the matter said. The news was first reported by IFR, a Thomson Reuters publication.

The bank line-up is not final, one person familiar with the plan said.

A representative for Shuanghui said in an email the company would not comment on any enquiries related to a possible IPO.

Plans for an IPO by Shuanghui were first revealed by Reuters in July when sources said the combined Shuanghui/Smithfield company would have a value of about $20 billion.

The Smithfield purchase was the largest ever acquisition of a U.S. company by a Chinese firm, bringing together the world's biggest hog producer and China's largest meat processing company - Shuanghui-owned Henan Shuanghui Investment & Development Co


Including debt, the deal was valued at $7.1 billion. Bank of China and Morgan Stanley together provided $7 billion of loans to finance it.

Despite political opposition in the United States, the deal closed in September, allowing Shuanghui to directly sell Smithfield pork goods across China to meet the country's huge demand for the product.

Shuanghui International's private equity investors include China's CDH Investments, which owns 33.7 percent through several funds and New Horizons, founded by Winston Wen, the son of China's former premier Wen Jiabao, which owns 4.2 percent.

Goldman Sachs' (NYS:GS) main investing arm has a 5.2 percent stake, public filings showed. Singapore state investor Temasek Holdings (TEM.UL) has a 2.8 percent holding.

Hong Kong stock exchange rules require one year of ownership before a merged entity can list, though companies can apply for a waiver to seek an earlier deal. IFR said the IPO is expected in the second quarter of 2014.

At $6 billion, the IPO would be the biggest in Asia Pacific since AIA Group's $20.5 billion listing in October 2010.

(Reporting by Fiona Lau of IFR and Elzio Barreto; Additional reporting by Denny Thomas, Stephen Aldred and Alice Woodhouse; Editing by Michael Flaherty and Edwina Gibbs)

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