Source: MEATINGPLACE, 4/29/14
 
Smithfield parent WH Group has postponed its already reduced initial public offering on the Hong Kong Stock Exchange, citing deteriorating market conditions.

“In light of deteriorating market conditions and recent excessive market volatility, the company, having consulted the joint sponsors, has decided that the global offering will not proceed at this time,” WH Group said in a statement forwarded to Meatingplace.

Late last week the company announced it would reduce the size of the IPO from an initial estimated $5.3 billion to about $1.9 billion.

Last year Shuanghui International, which has since changed its name to WH Group, bought Smithfield for $4.7 billion in cash, plus debt assumption.

As many as 29 investment banks were working on the deal, which critics said created confusing messages about details of the offer.

Further implications
The reasons behind pulling the IPO may go beyond market conditions, leaving in question the combined company's financial situation.

Notes Usha Haley, professor of management at West Virginia University, who has written several books on business in China: "WH took on huge debt, mostly through government and government-assisted bank loans and other subsidies for the $4.9 billion acquisition of Smithfield Foods last year. But, as I brought up in my testimony before the US Senate last year, there is no evidence of cost-savings through the deal, and the deal was not made for efficiency considerations.

"The acquisition was made to further the goals of state capitalism and not private investors — [that is,] to become the biggest pork company in the world, which WH now is, and to acquire U.S. technology, which WH now has,” she said.

Just two weeks ago, Standard & Poor's Ratings Services gave Smithfield Foods Inc., a "BB-" corporate credit rating, "on CreditWatch with positive implications," according to reports.

"The CreditWatch placement follows WH Group Ltd.'s announcement that it is [planning]an IPO on the Hong Kong Stock Exchange," said S&P credit analyst Chris Johnson, in a report on StreetInsider.com. "We expect the company to use net proceeds from the transaction for debt repayment [which] could improve the group's financial risk profile and result in a higher group credit profile."

However, the report notes, "if WH Group does not complete the proposed IPO as
currently described, we would reevaluate the CreditWatch listing and ratings."

Executive compensation
Smithfield executives and shareholders have already received their compensation for last year's buyout.
In addition, in documents filed with the Securities & Exchange Commission, Smithfield CEO C. Larry Pope is shown to have received just over $12 million in total compensation for the last eight months of 2013; the eight-month reporting period is due to the company's switch in fiscal year dates, from an April fiscal year to WH Group's calendar fiscal year.

The $12 million in compensation for the eight-month period compares with Pope's total compensation for Smithfield's fiscal 2013 of $10.8 million, and $16.5 million in fiscal 2012. The make-up of the compensation package includes base pay, bonuses and stock options, among other categories. For the reporting period, Pope saw a huge jump in his payout from his pension plan, to more than $4.3 million for the eight-month period from about $333,000 in both fiscal 2013 and 2012.

This story has been updated with additional information, compared with our story that ran earlier.

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