CVC completes China dumpling chain buyout

The size of the transaction has not been disclosed.

Founded in 1996 by Guoqiang Wu - who remains a shareholder in the business - Da Niang has a network of more than 440 restaurants in 19 provinces across China with around 7,000 employees. It claims to be a household name in the dumpling segment, having standardized a Chinese staple food item and rolled it out nationwide.

"Da Niang is a leading player in the fast growing Chinese quick-service restaurant sector and the number one dumpling chain operator, with a strong and stable management team," Francis Leung, managing partner and chairman of Greater China at CVC, said in a statement.

"Our significant experience in the sector will help solidify Da Niang's market leadership, and we look forward to partnering with the management to take the company to the next level."

The deal follows the acquisition of a controlling interest in EIC, China's leading overseas education counseling service provider, for a reported sum of around $200 million. The transaction facilitated the exit of Actis, which had been a minority investor in the business since 2011. It was also completed in December.

The third China control deal, which CVC, which has yet to be officially announced, is South Beauty Group, another restaurant chain. The mooted fee for the business, which operates around 70 restaurants serving spicy Sichuan-style food, was in the region of $300 million.

South Beauty sold a minority stake to CDH Investments and China International Capital Corporation (CICC) in 2008 and previously sought to raise as much as $200 million via an IPO, but the application was rejected by regulators. Founder Lan Zhang told media in 2011 that she regretted taking PE investment.

These transactions give credence to the theory that buyouts - not including take-private deals for US-listed Chinese companies, which often do not see control transfer to the PE investor - are becoming more readily available in China's private sector.

There are said to be several driving factors, including industry consolidation, cost pressures created by moderating macro growth and intense competition, and ageing founders who are not able to pass businesses on to younger generations. Carve-outs from Chinese companies offloading non-core assets could potentially be added to this list.

CVC is expected to announce a final close on its fourth pan-Asian fund in the next few weeks. The vehicle has a hard cap of $3.5 billion, including a $200 million GP commitment, although this may well be exceeded. A first close of $2 billion came last December.

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• Topics
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• Greater China
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• CVC Capital Partners