IPO of the Year – Yonghui Superstores

Doing a deal on the same day that Lehman Brothers collapsed doesn't sound like a recipe for success for any firm. Against the odds, however, Headland Capital Partners' investment into Yonghui Superstores resulted in the Chinese brand generating an 8.8x return multiple. "Yonghui's performance has definitely exceeded expectations," said Headland's Greater China head, William Shen, who holds a seat on the company's board. "It now has a footprint in 17 provinces in China and considered one of top six grocery chains in the country."

Yonghui has to date raised RMB2.64 billion worth of capital from its listing, which on Tuesday was trading on the Shanghai Stock Exchange at more than RMB32 per share. The firm offered 110 million shares at a price of RMB23.98 each last December. The deal, which was brokered by CITIC Securities, left Headland with a shareholding of 20.56% after its 24% stake was diluted.

It is unthinkable that Yonghui would have had such success in the public market were it not for the operational improvements brought about by Headland. When the investor committed $40 million to the company in 2007, the company was just a regional player, with just a handful of provincial stores.

One of the first things Headland did was introduce a quarterly survey of Yonghui's customers. "We interviewed customers and found that some of them had complaints," said Shen. "We therefore suggested the management think more about the shopping experience, the nitty gritty."

Having injected a further $35 million in the firm on September 15, 2008 - the day that Lehman's went bankrupt - Headland began advising the firm on its visual merchandising. Changes were made to the company's logo, which, according to Shen, further confirmed to the management that Headland's interests went "above and beyond the returns of our fund."

The investor went on to create a benchmarking system for the company. "We compared stores of similar sizes and vintages and asked why certain stores are doing better," explained Shen.

Today, Yonghui competes alongside the likes of Walmart and Carrefour, and the proceeds of its IPO have helped it to embark on a national expansion process.

Headland, meanwhile, continues to hold its prized asset close. "I don't view IPOs as just an exit route," Shen said. "It's just a step to further greatness."

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• Topics
• South Asia
• Southeast Asia
• North Asia
• Australasia
• Central Asia
• Greater China
• Consumer
• Consumer
• Headland Capital Partners
• China
• IPO