CDH Returns $500M To LPs With Loan Backed By WH Group Shares

Beijing-based alternative investment company CDH Investments, the largest financial shareholder with nearly 30% stake in the newly-listed Chinese pork giant WH Group, has entered into a loan agreement backed by its WH Group shares to return around US$500 million to the firm’s limited partners, according to media reports.

The unusual move came as Chinese private equity firms are pressured to return capital back to investors, in an environment when liquidity has been hard to obtain.

WH Group just completed a Hong Kong IPO in July, selling 2.567 billion shares at HK$6.20 per share, raising a total of HK$15.9 billion (US$2 billion).

CDH Investments has entered into the share-backed loan agreement because its shareholding is subject to a 12-month lock-up period post the IPO.

WH Group’s shares closed slight above the IPO price at HK$6.30 today. CDH held around 38.1% of the company before being diluted during the IPO.

Other shareholders of WH Group include a private equity unit of Goldman Sachs, which invested in WH Group in 2006, and held 2.42% of the company after the IPO.

Singapore state investment company Temasek Holdings and New Horizon Capital both invested in the company in 2009. They each held 1.44% and 0.14% of WH Group after the IPO, according to the company’s IPO prospectus.

The shareholders are all diluted during the IPO, during which they did not sell any shares.

WH Group, formerly known as Shuanghui International, is a majority shareholder in Henan Shuanghui Investment & Development Co., Ltd., China’s largest meat processing business.

In September 2013, WH Group acquired U.S. pork producer Smithfield International for approximately US$7.1 billion.

(Correction: an earlier version of the story stated incorrectly that CDH Investments were making in-kind distribution of WH Group shares back to limited partners.)

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Nina Xiang is the co-founder and managing editor overseeing editorial content and product development at CMN. Before founding CMN in 2011, Nina worked at BusinessWeek magazine in Beijing and Institutional Investor magazine in New York, writing about business and financial services. While in New York, she also served as part-time correspondent for Shanghai's financial television channel, China Business Network, as well as China Radio International, China's national English-language radio network.