CDH realizes $806m through part-exit from WH Group

The company said in a regulatory filing that CDH had placed one billion shares at a price of HK$6.25 apiece, a 7.9% discount to the October 27 closing price. The sale - which reduces the private equity firm's holding to 12.94% from 19.77% - is the second in two months, following a HK$9.25 billion transaction at the end of August.

The CDH interest comprises shares held by four funds and by co-investors. The private equity firm has indicated it may transfer up to 697.2 million of the co-investment shares to the direct ownership of the co-investors. If the transfer takes place in full, the CDH interest in WH would fall to 8.18%.

CDH first invested in WH - then known as Shuanghui, which is the main brand the company operates under in China - in 2007. Over time it amassed a 30% equity stake in the business, committing around $1 billion from its funds and through co-investment. The company also won backing from the likes of Goldman Sachs, New Horizon Capital and Temasek Holdings.

During this period, WH has evolved from a state-owned meat processor into the world's largest pork company, with a presence across key segments of the industry value chain, including hog production, fresh pork and packaged meats. Most of its businesses are under A-share listed Henan Shuanghui Investment and Development, in which WH holds a 73% stake.

In 2013, the company acquired Smithfield Foods, the leading pork producer in the US and the world's largest pork exporter, for $7.1 billion including debt. Since the merger, WH has been streamlined from numerous individually-run units into four core business groups. Integration efforts include boosting exports of pork from the US to China and introducing Smithfield's equipment, technology and branding expertise to produce American-style packaged meats for sale in China.

"The cross-border integration of leading domestic companies is the best way to achieve globalization for agricultural products. Shuanghui's acquisition of Smithfield consolidates industry resources, which helps hedge cyclical uncertainty and matches supply to different market demands globally," said Zhen Jiao, CEO of CDH, in a statement.

WH went public in Hong Kong in August 2014, raising $2 billion in its IPO. Keen to return capital to investors in its early funds, CDH attempted to circumvent the one-year lock-up by pledging shares in WH in return for a $500 million loan in October 2014. However, movements in the company's share price undermined the economics of the arrangement and the pledge was abandoned.

WH's turnover reached $21.21 billion last year, down 4.6% from 2014. The US accounted for 60.1% of turnover with China contributing 33.4%. In terms of operating segment, packaged meat products were responsible for 53% of turnover, ahead of fresh pork on 40.5% and hog production on 4.7%. Net profit came to $995 million in 2015, up from $972 million the previous year.

CDH manages more than $19 billion in assets across private equity, venture capital, real estate, mezzanine, public equity and wealth management strategies. Private equity accounts for the bulk of this and the firm is currently investing its fifth US dollar-denominated vehicle, which closed at $2.55 billion in early 2014.

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• Topics
• Greater China
• Consumer
• Open market
• China
• CDH Investments Management
• Exit