Private Equity Investors Place Big Bet On China’s Meat Industry

Chinese food conglomerate COFCO Group has formed a strategic partnership with a consortium of private equity firms to build and manage large-scale industrialized hog farms and meat processing plants in China, according to a joint announcement.

U.S. private equity firm Kohlberg Kravis Roberts & Co. (KKR), Baring Private Equity Asia, Hopu Investment Management Co. and Boyu Capital will invest an undisclosed amount in COFCO Meat, a subsidiary of COFCO Group, in a bid to provide high-quality meat to address increasing food safety issues in China.

China accounts for more than 50% of global pork consumption, while large-scale farms with an annual output of 50,000 or more hogs contribute less than 1% of the total domestic supply, according to the U.S. Department of Agriculture and the China Animal Industry Yearbook.

Large-scale farms are expected to increase more than six fold by 2020 given their food safety and quality control capability, as well as their greater operational efficiency compared with smaller farms.

Established five years ago, COFCO Meat is engaged in hog and poultry production, processing, distribution, and meat imports and exports. The company markets its fresh meat and processed meat products under the brands Joycome and Maverick.

"Bringing in the four strategic investors is an action by COFCO to diversify our equity ownership and enhance our corporate governance," comments Ning Gaoning, chairman of COFCO Group.

Aside from private equity heavyweight KKR and Asian private equity leader Baring Private Equity Asia, Hopu and Boyu are both well-connected with the Chinese government.

Boyu Capital’s executives include former TPG executive Mary Ma, the grandson of former Chinese president Jiang Zemin Alvin Jiang, former Ping An Insurance executive director Louis Cheung and ex-Providence Equity Partners’ Sean Tong.

Alvin Jiang reportedly played a key role in Boyu Capital’s investments in Alibaba Group and Cinda Asset Management, as well as a US$100 million controlling stake in Sunrise Duty Free, a retailer with outlets in Beijing and Shanghai’s airports.

Hopu is co-founded by Fang Fenglei, a former Goldman Sachs executive with extensive ties to China’s business elite and governments. Lately, Hopu has invested in Russian copper mines, as well as in the Chinese dairy, agriculture and warehousing sectors.

China Expert Network
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