Private equity moves on Cofco unit in US$270 m deal
Consortium led by KKR taps opportunities arising from demand for quality food supply with purchase of majority stake in meat operation
A consortium of four private-equity firms has agreed to pay about US$270 million for a majority stake in a meat unit of China's largest grain trader Cofco, tapping the growing demand for quality food supply on the mainland after a series of food scandals.
For KKR, which invested about US$150 million in the meat unit, this marks the first investment in China's pork industry after a number of successful deals in China's food industry, according to a person familiar with the deal.
The transaction comes after the United States private equity giant bought holdings in Ma Anshan Modern Farming and Asia Dairy.
Beijing has pledged to enhance food quality following a series of scandals linked to melamine-laced baby formula and rat meat sold as mutton.
Cofco Meat, one of the largest hog producers in China, has large-scale operations that help "to produce high-quality meat products to address increasing food safety issues", according to the statement. It did not specify the size of the stake bought by KKR and its fellow investors.
The expansion in China's pig production is putting more demand for oversight on the industry as demand for meat surges. The country accounts for more than 50 per cent of global pork consumption, according to yesterday's statement.
New York-based KKR is a no stranger to the Chinese consumer market. It teamed up with China's largest raw-milk producer Modern Dairy and CDH Investments, a home-grown private-equity firm with US$8 billion in assets, for a joint venture last year that would invest US$140 million to build two dairy farms.
The investment in Cofco is the first time BPEA is putting its money into a state-owned enterprises.
Hopu Investment Management, founded by former Goldman Sachs bankers with the backing of Singapore's Temasek, and Boyu Capital, whose partners include former Lenovo chief financial officer Mary Ma and the grandson of former president Jiang Zemin, are the other two investors.
Cofco and the four investors will build and manage large-scale industrialised pigs farms and meat processing plants in China.
"Bringing in four strategic investors is an action by Cofco to diversify our equity ownership and enhance our corporate governance," Cofco chairman Ning Gaoning said in a statement.
Cofco, or China National Cereals, Oil and Foodstuffs Corp, in April agreed to pay US$1.5 billion for a 51 per cent stake in the agricultural commodities unit of Singapore-listed Noble Group, in a move seen as part of China's ambition for food security.
Additional reporting by Bloomberg
