Lunar Capital backs Chinese babywear firm

Lunar acquired its stake, believed to be in the region of 65%, in exchange for a cash injection of $50-100 million. The investor approached Yeehoo directly to suggest the deal, having first spent six months acquainting itself with China's babywear sector.

"In a deal like this, the cash equity is equal to but not greater in importance than the sweat equity," Derek Sulger, founding partner of Lunar Capital, tells AVCJ. "What we're bringing to the table is a real desire to help run the business. This company probably didn't know a year-and-a-half ago that they would be selling a majority, but we convinced them it was the right thing to do."

Lunar acquired its majority shareholding from a group of angel investors, all of whom re-invested as part of the deal. Several of the private equity firm's LPs co-invested, as did one or two prospective new LPs. A total of 60% of the investment was therefore channeled via Lunar's third vehicle, which closed on $150 million in early 2011, while the remaining 40% came from its co-investment fund.

The company's management - led by founder and CEO Alice Guo - also reinvested to retain a minority stake. The deal was completed without third-party debt.

Five out of eight positions on the Yeehoo board will be occupied by Lunar's team, including Sulger, while the Shanghai-based company will also be supported by hired advisers in the areas of business development, operations and financial control, as well as product design and e-commerce.

Lunar's strategy for growing value at the firm has various strands. It aims to grow Yeehoo's store network to new cities, in particular increasing the number of stores in provincial cities. It wants to build more efficient information management systems at the firm, and train staff in rolling out new products and services. It will also improve the company's branding by introducing more R&D and product mixes, run e-commerce initiatives and look into distributing third-party brands within China.

Founded in 1995, Yeehoo designs and distributes baby products for children ranging from newborn to four-years-old. It was chosen as Lunar's first investment into this segment due to its strong brand and product quality, the in-depth knowledge of its management, and the company's broad network.

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• Topics
• Greater China
• Buyouts
• Consumer
• buyout
• Lunar Capital Management
• Consumer
• China