China’s US$73 billion pet economy feeds IPO pipeline as companies backed by KKR, Hillhouse seek capital to expand

Wenzhou Yuanfei Pet Toy Products, which mainly produces leashes, started taking orders last week for its 409 million yuan initial public offering (IPO) in Shenzhen later this month, according to an exchange filing. Gambol Pet Group gained approval last month for its 600 million yuan IPO on the ChiNext board in Shenzhen.

They will add to peers like Hangzhou Tianyuan Pet Products and Shanghai Fullpet Pet Products, which have submitted their IPO plans, according to exchange filings. Larger groups like Yantai China Pet Foods and Petpal Pet Nutrition Technology went public in 2017. Shandong Luscious Pet Food Inc went public in Beijing in March this year.

The expansion drive underscores the potential in the industry while at the same time offering an exit route for early investors including private equity firms KKR, Hillhouse Capital and Goldman Sachs. China’s pet economy is projected to reach 811 billion yuan in 2025, according to iiMedia Research, from about 494 billion yuan expected this year.

“The boost by capital is very important, especially for the larger companies, as the companies view gaining market share and sharpening brand positioning as the most important thing,” said Lin Yidan, a senior analyst at TF Securities based in Shanghai. “The large amount of fundraising will lead to stiffer competition.”

Gambol is backed by investors including KKR and Legend Capital which also invested in personal-computer maker Lenovo Group. Hillhouse has invested at least US$1 billion in more than 100 pet-related companies, according to mainland media outlet The Paper. Ringpai Pet Hospital, which counts Goldman and Mars Inc among its backers, is said to be eyeing a Hong Kong IPO later this year, IFR reported.