ON the face of it, an initial public offering (IPO) for WH Group, the world’s biggest pork company, should have been an easy sell.

    China has huge and growing demand for pork and WH Group, a company created when China’s largest meat processing firm acquired the world’s biggest hog producer Smithfield Foods Inc., is well placed to deliver growth in what is still a highly fragmented market.

    But last week, WH Group slashed its proposed IPO size by two-thirds to US$1.9 billion — a result, fund managers and bankers say, of the company and its owners seeking too high a price, hiring too many underwriters (a record 29), as well as negative publicity over some sky-high executive compensation.

    The company also had sheer bad luck as sentiment toward new listings slid worldwide.

    WH Group started testing investor appetite about a month ago, but by the end of the Easter holiday, the writing was on the wall — it had to be revised down, sources involved in the deal said. Pulling it would have been an expensive option as WH Group needs the funds to repay debt incurred in its US$4.9 billion acquisition of Smithfield, they added.

    “The firm was a little too aggressive in the early stage of their marketing process. They were hungry for a large deal at quite a demanding valuation, plus the market, near term, didn’t turn in their favor,” said Tony Chu, a Hong Kong-based portfolio manager at RS Investments.

    From the get go, many investors and some underwriters had concerns about the deal because WH Group was looking to list just seven months after the Smithfield deal, too short a time for it to have wrought synergies from the integration.

    Still, the offering should have drawn investors if priced right, but that is exactly what didn’t happen. Launching the IPO three weeks ago, WH Group set an unusually wide indicative range of HK$8 (US$1.03) to HK$11.25 — a 40 percent difference between the top and bottom end, ignoring several bankers’ recommendations to price the deal more modestly.(SD-Agencies)