PE-backed China Shengmu Organic Milk launches $169m HK IPO
China Shengmu Organic Milk, an organic dairy maker backed by several PE investors, is targeting HK$1.31 billion ($169 million) through an IPO in Hong Kong.
The Chinese milk producer is offering 444.8 million shares in an indicative price range of HK$2.39-2.95 apiece, according to a regulatory filing.
It has secured Bao Hua Investment, which is owned by COFCO (Beijing) Agricultural Industrial Equity Investment Fund, as a cornerstone investor. It will commit $30 million, representing a 1.36% stake in Shengmu, assuming the IPO prices at the mid-point of HK$2.67.
The fund is jointly established by a number of investors including COFCO, China Jianyin Investment, Louis Dreyfus Commodities and Sumitomo Mitsui Banking Corporation.
Jinqiao Investment invested in China Shengmu across two rounds of funding between 2011 and 2012, taking a 0.44% stake. In February, it sold its entire holding to an individual shareholder in Shengmu for RMB19.68 million in December 2013 when the company was restructured ahead of the public listing.
At the end of last year, Goldman Sachs and Baring Private Equity Asia together acquired a 15.41% stake in Shengmu for RMB685.4 million ($110.4 million). Meanwhile, a consortium of investors including Sequoia Capital and BOC Investment, acquired a 12.54% interest for RMB648.2 million.
Upon completion of the IPO, Baring and Goldman will each own 6.22% of Shengmu. Sequoia and BOC Investment will hold 5.95% and 2.2%, respectively.
Shengmu had a 54.2% market share in China based on 2013 organic raw milk production volume, according to F&S Report. The total retail sales value of organic milk in China was RMB1.9 billion last year, accounting for 1.3% of overall milk sales in the country.
Located in Inner Mongolia, Shengmu owns 25 dairy farms with 30,621 organic dairy cows and 29,836 non-organic dairy cows. It supplies raw milk to Mengniu Group, Yili Group and Want Want.
The company saw its revenue increasing from RMB389.4 million in 2011 to RMB1.14 billion last year. Meanwhile, net profit reached RMB365 million in 2013, up from RMB106.1 million in 2011.
BOCI Asia and Goldman Sachs are handling the share sale.
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