Chinese #Dairy Firms Aim to Raise Up to $1.3 Billion in Hong Kong IPOs

Share on twitter
Share on facebook
Share on linkedin
Share on whatsapp
Share on email

Two Chinese dairy firms–China Shengmu Organic Milk Ltd. and Beijing Sunlon–are planning to raise as much as US$1.3 billion combined from Hong Kong initial public offerings this year, tapping into investor demand for access to China’s fast-growing dairy industry.
 
Shengmu, an organic-milk producer based in Inner Mongolia, has hired BOC International and Goldman Sachs Group Inc. to handle an IPO that will raise between US$500 million and US$800 million, people with direct knowledge of the deal said Friday. It applied for listing approval from the Hong Kong Stock Exchange last month, they said, and listing, once it gets the green light, could happen as soon as June, they said.
 
Also gearing up for a Hong Kong IPO is Affinity Equity Partners-backed Beijing Sunlon, which is planning to list in Hong Kong in the second half of the year. Sunlon is currently selecting banks to handle its US$300 million to US$500 million IPO, other people with direct knowledge of the deal said.
 
The two dairy companies are seeking to raise funds at a time when China’s thirst for milk products is surging, although the domestic industry has yet to shake off a weak reputation after domestically produced milk powder contaminated with melamine killed six infants and sickened hundreds of thousands of others six years ago.
 
The fundraising can help the two dairy companies gain market share in China. China’s government is encouraging the consolidation of the country’s domestic milk-powder sector to help the homegrown industry compete with international rivals that dominate the lucrative premium-end of China’s milk-product market.
 
China’s dairy consumption is expected to rise 38% over the next eight years, according to the Institute for Agriculture and Trade Policy.
 
Chinese dairy companies have been active in tapping Hong Kong’s capital markets, appealing to investor appetite for one of China’s strongest consumer growth stories. Last year, raw milk producer China Huishan Dairy Holdings Co, raised US$1.5 billion in an IPO, while YuanShengTai Dairy Farm, one of the country’s biggest raw milk producers, raised US$452 million. Shares of Huishan and YuanShengTai are trading 17% and 39% below their IPO prices respectively.
 
Sunlon is a joint venture between Affinity and Beijing Capital Agribusiness Group that the two entered into about six months ago. Affinity invested US$123 million to take 40% in October. Sunlon declined to comment on its listing plan. A representative for Affinity wasn’t immediately available to comment.
 
Affinity’s not the only private-equity firm invested in China’s dairy industry. KKR & Co. teamed up with CDH Investments to invest in China’s Modern Dairy in 2008, ahead of a 2010 Hong Kong listing of the company’s stock. In September, KKR, CDH and Modern Dairy announced a $140 million investment to build two new large-scale dairy farms in China, citing the population’s demand for premium dairy products and safer milk.
 
Strategic investors are also looking for ways to invest in China’s growing dairy industry. Danone SA invested $663 million to raise its stake in China’s Mengniu Dairy Co. to 9.9% from 4% earlier this year, making the French company the second-biggest investor in China’s largest milk producer behind China’s state-owned food company Cofco.
 
Write to Yvonne Lee at yvonne.lee@wsj.com, Cynthia Koons at cynthia.koons@wsj.com and Prudence Ho at prudence.ho@wsj.com
 
By Yvonne Lee, Cynthia Koons and Prudence Ho
 
HONG KONG–Two Chinese dairy firms–China Shengmu Organic Milk Ltd. and Beijing Sunlon–are planning to raise as much as US$1.3 billion combined from Hong Kong initial public offerings this year, tapping into investor demand for access to China’s fast-growing dairy industry.
 
Shengmu, an organic-milk producer based in Inner Mongolia, has hired BOC International and Goldman Sachs Group Inc. to handle an IPO that will raise between US$500 million and US$800 million, people with direct knowledge of the deal said Friday. It applied for listing approval from the Hong Kong Stock Exchange last month, they said, and listing, once it gets the green light, could happen as soon as June, they said.
 
Also gearing up for a Hong Kong IPO is Affinity Equity Partners-backed Beijing Sunlon, which is planning to list in Hong Kong in the second half of the year. Sunlon is currently selecting banks to handle its US$300 million to US$500 million IPO, other people with direct knowledge of the deal said.
 
The two dairy companies are seeking to raise funds at a time when China’s thirst for milk products is surging, although the domestic industry has yet to shake off a weak reputation after domestically produced milk powder contaminated with melamine killed six infants and sickened hundreds of thousands of others six years ago.
 
The fundraising can help the two dairy companies gain market share in China. China’s government is encouraging the consolidation of the country’s domestic milk-powder sector to help the homegrown industry compete with international rivals that dominate the lucrative premium-end of China’s milk-product market.
 
China’s dairy consumption is expected to rise 38% over the next eight years, according to the Institute for Agriculture and Trade Policy.
 
Chinese dairy companies have been active in tapping Hong Kong’s capital markets, appealing to investor appetite for one of China’s strongest consumer growth stories. Last year, raw milk producer China Huishan Dairy Holdings Co, raised US$1.5 billion in an IPO, while YuanShengTai Dairy Farm, one of the country’s biggest raw milk producers, raised US$452 million. Shares of Huishan and YuanShengTai are trading 17% and 39% below their IPO prices respectively.
 
Sunlon is a joint venture between Affinity and Beijing Capital Agribusiness Group that the two entered into about six months ago. Affinity invested US$123 million to take 40% in October. Sunlon declined to comment on its listing plan. A representative for Affinity wasn’t immediately available to comment.
 
Affinity’s not the only private-equity firm invested in China’s dairy industry. KKR & Co. teamed up with CDH Investments to invest in China’s Modern Dairy in 2008, ahead of a 2010 Hong Kong listing of the company’s stock. In September, KKR, CDH and Modern Dairy announced a $140 million investment to build two new large-scale dairy farms in China, citing the population’s demand for premium dairy products and safer milk.
 
Strategic investors are also looking for ways to invest in China’s growing dairy industry. Danone SA invested $663 million to raise its stake in China’s Mengniu Dairy Co. to 9.9% from 4% earlier this year, making the French company the second-biggest investor in China’s largest milk producer behind China’s state-owned food company Cofco.
 
Source: WSJ

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

Te puede interesar

Notas
Relacionadas