Hutchison Whampoa (0013.HK) plans to spin off its holdings in two ports assets, a move expected to raise US$6 billion ($7.7 billion) in what could be Southeast Asia’s largest ever stock offering.

The listing by Hutchison, a ports-to-telecom conglomerate owned by Hong Kong tycoon Li Ka-shing, will take place on the Singapore Stock Exchange, allowing the company to use the proceeds for investments in its ports and infrastructure business.

“Hutchison’s divestments will likely result in a meaningful reduction in the company’s net debt and increase the company’s financial flexibility,” said Kalai Pillay, senior director at Fitch’s Asia-Pacific Corporates Team, noting that the deal will also reduce cash flows to Hutchison from the ports business.

 

The key assets of Hutchison Port are deep-water container port operations in Hong Kong, China’s southern Guangdong province and Macau.  

 

Hutchison proposes to spin off Hutchison Port Holdings Trust in a separate listing in Singapore, where regulations are favourable for trusts-like companies to list, it said in a filing with the Hong Kong stock exchange on Tuesday.

 

The statement helped explain why Hutchison would float the ports unit in Singapore rather than Hong Kong, where heavy demand from investment funds have made Hong Kong by far the top exchange for public listings in the last two years.

 

Shares of Hutchison fell 2.4% on Tuesday to HK$93.65 per share in a broader market <.HSI> down 2.4%. Traders attributed the dip to the run up the stock has enjoyed this year.

 

Hutchison’s shares have risen 17% since the beginning of the year, making it the second-best performer among the main Hang Seng index. Since it reported earnings in August, its shares have jumped 77% .

Hutchison’s massive offering allowed the Singapore exchange to step out of the shadow of its neighbour to the north.

 

“This is a confidence booster for Singapore stock exchange and will continue to encourage the exchange to seek (its) niche to compete with the larger markets instead of competing head on without any product or service differentiation,” said Roger Tan, head of research at SIAS Research in Singapore.

 

Hutchison Port’s listing will be completed by March and will allow the unit to raise US$6 billion, according to IFR, a Thomson Reuters publication that first reported the size.

 

If successful, the deal will make it the largest listing eve in Southeast Asia and Singapore. So far, the biggest listing in southeast Asia is Malaysia’s Petronas Chemicals (PCGB.KL), which raised $4.1 billion last year. In Singapore, Singapore Telecommunications’ (STEL.SI) US$4 billion float in 1993 was the biggest listing.