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Chinese beverage giant Wahaha eyes maiden unit spin-off, sources say

Hangzhou Wahaha Group, one of China’s biggest beverage producers, is targeting a potential unit spin-off in Hong Kong this year, according to two sources familiar with the situation. 

The move is likely to be the first step for the Chinese beverage giant to tap the city’s capital markets, they said. 

Citi and Haitong International have been closely working with Wahaha on the potential transaction, the sources said, declining to elaborate. 

The spin-off arm is likely to be Wahaha’s bottled tea unit, the first source said, adding that Wahaha has yet to make the final decision. 

The company has three core tea products, including Longjing Green Tea, Honey Green Tea and Iced Black Tea, according to its website.

The deal size is yet to be finalized as the company is discussing with the advisors on which assets to include in the potential listing vehicle, the first source said. 

It will use the proceeds for new product development and sales network expansion, the same source said.

The leading Chinese beverage producer is planning to submit its application to the Hong Kong Stock Exchange (HKEX) for the potential unit spin-off listing in the first half of 2023, the sources said. 

Long-awaited IPO candidate

Wahaha has been a long-awaited potential listing candidate in Hong Kong’s IPO market over the past decade, the sources said.

Rumours of a potential listing first emerged in 2007. Bloomberg reported on 3 July 2020 that it was targeting to raise more than USD 1bn in a potential initial public offering (IPO). However, the company quickly denied the rumours, lieyunwang.com reported on the same day. 

Nongfu Spring [HKG: 9633] could be considered among Wahaha’s peers. Nongfu Spring, with a market cap of HKD 223.8bn (USD 28.5bn), currently trades at a price-to-earning (P/E) of 60.2x, along with a 55x forward P/E ratio. 

Established in 1987 by Chairman Zong Qing-hou, Wahaha offers more than 200 types of food and beverage products, including bottled water, protein drinks, carbonated soft drinks, bottled tea, fruit and vegetable juice, coffee, plant-based drinks, canned food, dairy products, medical and health food, among others, citing its website. 

The company has over 180 subsidiaries and more than 80 production factories, with a team of more than 30,000, as per its website. 

Its turnover had accumulated CNY 860.1bn (USD 126.6bn) over the past 35 years, the website reads. 

Apart from the above, Wahaha is also engaged in industrial robotics development, smart logistics services and industry investment, its website shows. 

Zong was listed as mainland China's 45th richest person last year by Forbes, with a net worth of USD 7.5bn.

Citi declined to comment. 

Wahaha and Haitong did not respond to requests for comment.