WH Group's chopped IPO looks unappetising. The mainland pork producer is slashing the size of its Hong Kong fundraising to as little as $1.3 billion, down from a previous target of at least $3 billion. But WH Group's reluctance to accept a lower price means the IPO remains a tough sell.

The company, formerly known as Shuanghui, is sticking with its original plan to offer new shares at the indicated range of HK$8 ($1.03) and HK$11.75 each. Even at the low end, that values its US business Smithfield at 21 percent more than the $7.1 billion the mainland group paid barely eight months ago, according to an analysis by Reuters Breakingviews.

That full-fat price is on top of the 31 percent premium that WH Group paid to take control of the US business. The enlarged group claims it can add value to Smithfield by selling more low-cost US pork to mainland consumers. Yet large institutional investors appear unwilling to pay for value that they can't yet see. A better plan would be for WH Group to press ahead with the original offering but at a lower share price.

The author is Una Galani, a Reuters columnist.

Reuters