Asia’s richest man’s latest vote of confidence in Europe is a dual-listed Watsons IPO

March 18, 2014
March 18, 2014

A.S. Watson, the retail conglomerate controlled by Li Ka-Shing, is planning a rare dual listing in London and Hong Kong before the end of June that could raise between $5 and $6 billion (paywall). It’s the latest sign that a rebounding Europe is a lot more attractive to Asia’s richest man than the rapidly cooling markets of China and Hong Kong.

The company’s 11,000 retail stores include drug store chain Watsons, supermarkets in Asia, perfume stores in Europe and the UK’s Superdrug. Li has been selling assets in China, including stakes in real estate developments, to build up firepower in Europe, where he thinks companies are undervalued.

Listing on two exchanges simultaneously carries a higher regulatory and corporate burden, but the payoff can be considerable, mostly because the company would have access to a broader class of European investors. In addition, the Financial Times reports (paywall), A.S. Watson could conceivably be on both the UK’s FTSE index and Hong Kong’s Hang Seng index, which would mean that a much higher number of passive index-tracking mutual funds would have to buy the company’s shares.

Other high-profile dual-listings between Hong Kong and London’s exchanges in recent years have been hatched for the opposite reason—to give companies that would traditionally list in Europe access to Hong Kong’s pool of Asian investors. In 2011, for example, Swiss mining company Glencore International announced an $11 billion dual-listing as Hong Kong pushed for more resource companies listings, hoping to draw mainland Chinese investors.

Li’s decision to go to London might have as much to do with recent disappointments in Hong Kong as it does with the promise of a rebounding Europe.  The February spinoff of HK Electric Investments from his Power Assets in Hong Kong priced at the low end of its expected range, raising just $3.1 billion, about half the hoped-for total. The FT noted wryly that Chinese investors are often wary of buying anything that the infamously savvy Li wanted to sell.

Perhaps European investors will be more amenable.

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