Carlyle buys stake in Chinese feed firm
GLOBAL asset manager Carlyle Group is to acquire an 11.3 percent stake in CP Pokphand Co, a leading livestock and aqua feed producer in China, for US$175 million.
Carlyle Asia Partners III LP, a US$2.55 billion pan-Asian investment fund, will acquire convertible preference shares and options from the company's parent Charoen Pokphand Group, Thailand's largest agribusiness conglomerate, ahead of July 22, United States-based Carlyle said.
Charoen Pokphand plans to use part of the proceeds to prepay about US$150 million of the intercompany debt of US$288 million which is outstanding to CP Pokphand before the end of this year.
"Carlyle sees great growth potential in China's agriculture sector and believes the rapidly expanding middle class, increasing demand for quality food supply, as well as heightened awareness of food safety and dietary issues, will underpin future growth in the sector," said Patrick Siewert, senior director of Carlyle.
"We believe that China's feed industry, driven by the change in demographics and government policies, is at a point where the industry will be more stable, and in turn, will favor the responsible, experienced and leading producers such as CPP," Siewert said.
CP Pokphand is an investment arm of Charoen Pokphand in China. Known in China as "Chia Tai," the company's business covers 26 provinces and regions in China and has more than 26,000 exclusive agents distributing its products nationwide.
"Carlyle's unique experience in the management of food industry value chain will support the company to produce superior products and to become the leading supplier to China's livestock farming industry," said Dhanin Chearavanont, chairman of CP Pokphand.
Stable and growing meat consumption is driving demand for livestock feed, and China's per capita animal protein consumption is still below most developed countries.
It is expected that as meat consumption in China grows along with its rate of disposable income, the demand for animal and aqua feed products will also increase, Carlyle said.The feed industry is also undergoing consolidation as the Chinese government strives to improve food safety standards through tougher licensing and monitoring systems.