Blackstone, Capital International make China agro play

The deal also included Atlantis Investment, according to AVCJ sources, and reportedly Warburg Pincus. Dili is releasing around a 30% stake to the investors prior to the IPO.

Dili’s existing assets in the sector include China Shouguang Agricultural Product Logistic Park, based out of China’s Shouguang, Shandong Province, the largest trading and production hub of the country’s vegetable industry, as well as the Harbin Hada Agricultural and Sideline Products Joint Stock Co. Ltd. and the Qiqihar Hada Agricultural and Sideline Products Co. Ltd. The company will be seeking an IPO in Hong Kong later this year. BOC International and UBS are reportedly advising on the listing.

According to Jim McGuigan, Partner at Capital International, the investment is from Capital International’s fifth-generation emerging-markets-focused private equity fund, CIPEF V, a $2.2 billion fund. The investment in Dili follows CIPEF V’s 2007 investment of $107 million in Renhe Commercial, now listed on the Stock Exchange of Hong Kong. with market capitalization of over $5 billion. “The current investee company Dili and Renhe are affiliated with a common chairman, Mr Dai Yongge,” he told AVCJ. “Doing our due diligence over recent months, we developed a strong conviction around the Dili thesis. And in the context of this investment we’ve renewed our very strong conviction around the capabilities of Chairman Dai and his management team.”

“After an early approach from the company, Capital International commenced due diligence and began to embrace the Dili business plan,” McGuigan added. “The early endorsement of the Dili management and business plan by James Ho and Nick Chen of CIPEF’s China team appears to have been helpful for the company and its advisers in attracting Blackstone and other private equity investors to the consortium.”

Dili’s essential proposition is the upgrading, and relocation if necessary, of China’s existing urban wholesale vegetable facilities, most of which, according to McGuigan, are inconveniently located in urban centers with considerable access and logistics issues. “They’re just not modern and efficient. Chairman Dai and his group developed the concept of working with municipal governments to relocate these facilities to better locations,” he emphasized. In Shouguang, he noted, “they’ve developed a massive new modern facility, embraced by both the farmers delivering the product and all the customers, finding it much more efficient.”

Dili will be primarily using the proceeds of the investment to further develop and acquire more facilities across China, and Capital International and Blackstone will both be sending representatives to the company board to support its strategic development, McGuigan added. The financial investors will be in influential minority positions, but McGuigan emphasized his firm’s preference for well-diligenced, influential minority positions in leading companies with first-class management compared to control positions in lesser players. “Across the emerging markets, we seek to back market leaders, as we’ve found in emerging markets the strong tend to get stronger,” he told AVCJ. “We look for market leadership, or potential. In those cases, in emerging markets typically a control position is not available … What is important as a private equity investor is the ability to influence and ultimately your judgment on the management team.”

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• Topics
• Greater China
• Expansion
• Consumer
• The Blackstone Group
• Capital International
• Warburg Pincus Asia