With a more sensible valuation and low-key marketing strategy, WH Group – the world’s largest pork producer – successfully completed its Hong Kong initial public offering (IPO) in its second attempt where the retail portion generated an oversubscription of 55.22x.

The company offered 2.57 billion new shares at HK$6.20 (US$0.80) each to raise a total of HK$15.93 billion. While this was less than half of what it initially planned to generate, this fund raising still represented the third largest IPO in Asia-Pacific so far in 2014.

The original deal intended to raise as much as HK$41.10 billion when it was scrapped in April. The IPO price represented a price-to-earnings (P/E) ratio of 11.5x, compared with the P/E of between 15x-20x previously.

In addition, the company hired just two banks – BOC International and Morgan Stanley – to manage the share sale, compared with the record 29 banks that it appointed in the pulled deal.
The stock performed on its trading debut on August 5, closing 7.4% higher than the offer price at HK$6.66 after touching an intra-day high of HK$6.86.

Though it lacked cornerstone investors, the IPO this time generated a more positive reception from institutional investors as it has in the prospectus explicitly stated the lock-up period for shareholders suspected to exit with high valuation in the previous IPO, according to a source with knowledge of the matter.

The management team is now subject to a lock-up period of three years, while shareholders private equity CDH Investments and New Horizon Capital are subject to lock-ups of one year and six months, respectively.

Net proceeds from the IPO will be used to repay the US$2.5 billion tranche of a loan maturing on August 30 2016, which the company borrowed to fund the acquisition of the US pork producer Smithfield in 2013.

“Following the integration of Smithfield with Shuanghui Development last year, WH Group has reaped efficiencies and synergies on various levels. The stellar results recorded by Shuanghui Development and Smithfield in the first quarter of 2014, as seen in the doubling of the company’s net profit for the same period in the preceding year, are testament to the emerging synergies of the merger,” WH Group says in a company statement.

For the first three months ended March 31 2014, the company recorded a surge in turnover of 225.2% to about US$5.05 billion compared to US$1.55 billion in 2013. Net profit (before biological fair value adjustments) almost doubled to US$247 million in the first quarter of 2014, from around US$126 million for the same period in the preceding year.

The WH Group IPO came as the latest food safety scandal broke out in China with Shanghai Husi Food, a unit of the US-based OSI Group, allegedly supplied expired meat to customers that include McDonald’s and KFC parent Yum Brands.

At the time of writing, WH Group has not responded to The Asset’s request for comments on the issue.