If the proposed purchase of Smithfield Foods by Chinese company Shuanghui International moves forward – Reuters is reporting the plan is to list the combined company in Hong Kong.
With the combined Smithfield-Shuanghui operation valued at around $20 billion the Hong Kong IPO would be valued at around $4 billion. Reuters cites sources with knowledge of the matter – saying a Hong Kong IPO would allow the merged group to trade in a market that would place a higher valuation on the stock than the U.S. or other exchanges.
A Hong Kong listing is also said to offer an ideal exit route for Shuanghui’s private equity investors. Reuters reports Shuanghui could also use the proceeds to pay down some of the debt. Obviously this deal has not closed – and sources say plans for what happens after the takeover will only be finalized upon completion of the deal. According to Hong Kong stock exchange rules – one year of ownership is required before a merged entity can list.