Southeast Asia's biggest IPO could rake in as much as $5.4 billion

HONG KONG - Li Ka-shing's Hutchison Port Holdings Trust expects to raise $5.4 billion in Southeast Asia's biggest initial public offering, according to three people with knowledge of the transaction.

The trust plans to sell about 5.4 billion units at $1.01 each, said the people, who declined to be identified before an announcement. A final decision will be made on Monday, they said. The price range was initially set at 91 cents to $1.08 before being narrowed to 99 cents to $1.03.

The price "will make the yield more attractive", Wong Sui Jau, general manager of Fundsupermart, the online division of IFAST Financial Pte, which manages $2.8 billion, said on Friday. "It's still a positive business overall because of Hong Kong's proximity to the mainland and the mainland's growth."

Investors have cooled on Asian equities as unrest in the Middle East pushes oil prices higher and accelerating inflation from China to India prompts central banks to boost borrowing costs. The MSCI Asia Pacific Index has slipped 2 percent this year after gaining 14 percent in 2010.

DBS Group Holdings Ltd, Deutsche Bank AG and Goldman Sachs Group Inc are managing the Hutchison Port sale, the world's largest IPO this year.

The port trust's yield is expected to be 5.89 percent based on the final sale price and its 2011 earnings forecast, according to the people. The Hong Kong-listed terminal operators China Merchants Holdings International Co and COSCO Pacific Ltd will both have dividend yields of less than 3 percent this year, based on analyst estimates compiled by Bloomberg.

Hutchison, controlled by Li, Hong Kong's richest man, fell 1.73 percent to HK$91.15 ($11.7) on Friday in Hong Kong. It's gained 15 percent this year, compared with an advance of 1.7 percent for the benchmark Hang Seng Index.

Companies have sold $2.8 billion of IPO shares in the Asia-Pacific region this year, compared with $18.5 billion in the first quarter of 2010, according to Bloomberg's data.

Hutchison Port Holdings Trust will own assets including container terminals in Hong Kong and the neighboring Guangdong province. Hutchison will manage the trust and retain a 25 percent stake, according to a Jan 18 statement.

Cornerstone investors led by Capital Research & Management Co and Paulson & Co will invest $1.62 billion in the trust IPO, according to the prospectus filed with the Monetary Authority of Singapore.

Capital Research will invest $634 million in the offering, according to the term sheet. Paulson & Co, managed by John Paulson, will buy a $350 million stake and Lone Pine Capital LCC will invest $186 million, it said. Jenkin Hui and family, Singapore's state investment company Temasek Holdings Pte, Cathay Life Insurance Co and Metropolitan Financial Services Ltd will each invest $100 million, and Ally Holding Ltd will buy a $50 million stake.

The IPO is likely to surpass the $4 billion raised in Singapore Telecommunications Ltd's offering in 1993, and Petronas Chemicals Group Bhd's $4.1 billion initial offering in November in Malaysia.

Hutchison, which also invests in drugstores, real estate and mobile-phone services, opted to sell the port assets in Singapore because business trusts can't be listed in Hong Kong.

The company chose a trust structure because of the assets' stable cash flow and growth potential, it said in January.