Private equity firm pledges HK$12.6b WH Group shares
Beijing-based private equity firm CDH Investments, the largest shareholder of Sino-US pork producer WH Group, is repaying investors by pledging HK$12.6 billion worth of WH shares.
Beijing-based private equity firm CDH Investments, the largest shareholder of Sino-US pork producer WH Group, is repaying investors by pledging HK$12.6 billion worth of WH shares.
The move mirrors the difficulties facing private equity firms to exit their investments through initial public offerings in Hong Kong, where investors remain sceptical of any exit by secretive private equity firms that rarely disclose their financial and operating conditions.
The deal would allow CDH to return the money to its investors before the 12-month lock-up period on its WH shares since the private equity firm is barred from selling any of its 30 per cent stake in the pork company before August next year.
In 2006, CDH and Goldman Sachs' private equity arm were among the first batch of early investors in the Henan-based pork company that went on to acquire America's Smithfield Foods for US$4.7 billion last year.
WH raised US$17.6 billion through a Hong Kong flotation in August.
Apart from WH, CDH has also invested in drug maker Luye Pharma Group and Beijing Digital Telecom, a mobile handset and digital product store chain that went public in July, and eHi, a mainland car rental firm that is looking to raise US$200 million.
"Pledging WH shares allows the investors to see a faster realisation of their investments," said a source who declined to be named because the structure of the transaction is confidential. "Getting the money back to the investors (limited partners of CDH) is a vital process in the private equity cycle where money managers and investors both look for realised return."
A spokesman at CDH declined to comment on the deal, but said the decision to pledge the WH shares after the lock-up period would depend on timing and pricing.
WH shares rose 3.38 per cent yesterday to HK$6.11, finishing at 1.45 per cent below its offer price in August.
In a filing with the stock exchange, WH said major shareholder CDH had agreed to mortgage HK$12.6 billion worth of its shares with an unnamed broker, without giving further information.
The shares would be used to back a commercial loan, it said.
