Sou Hu Cai Jing·2025-12-13 07:42Core Viewpoint - The retail giant Watsons Group is restarting its IPO plan after more than a decade, aiming for a dual listing in Hong Kong and the UK in the first half of 2026, with a fundraising target of $2 billion (approximately 14.2 billion RMB) and a potential valuation exceeding $30 billion [1][2]. Group 1: Financial Pressure and Debt - The IPO plan is driven by the parent company CK Hutchison's significant debt burden, totaling HKD 259.06 billion, with cash reserves of only HKD 129.44 billion, resulting in a debt coverage ratio of less than 50% [4]. - CK Hutchison has been divesting non-core assets, raising hundreds of billions of HKD, but this has not fully alleviated its debt pressure [5]. - The expected fundraising of $2 billion could improve cash reserves by 12% and raise the debt coverage ratio to 56%, significantly easing short-term repayment pressures [5]. Group 2: Market Challenges - Watsons is facing declining performance in the Chinese market, with a reported EBITDA drop of approximately 55% and an 18% revenue decline in health and beauty products [8][9]. - The number of stores in China decreased by about 4% to 3,630, with sales dropping by approximately 18.6% and 1% in the first halves of 2024 and 2025, respectively [10][11]. - The company is investing heavily in digital transformation and store upgrades, which require substantial capital, amidst ongoing challenges in the Chinese market [6][7]. Group 3: Strategic Implications - The dual listing is seen as a strategic move to enhance liquidity and mitigate geopolitical risks while balancing capital from both Eastern and Western markets [3]. - Analysts suggest that the IPO could provide Watsons with an independent financing platform and equity incentives, but caution that the underlying high leverage and declining Chinese business need to be addressed [10]. - The success of the IPO and its impact on Watsons' market position will depend on whether the capital raised is used effectively for digital transformation and operational efficiency rather than mere expansion [10].