SAIF exits as PepsiCo invests $130m in Chinese food distributor

Pepsico will buy 567 million shares in Natural Food, representing a 25.8% stake, for HK$1.80 per share from SAIF and members of Natural Food’s management. This was the stock’s closing price as of July 25, the day before the transaction was announced. The price spiked to HK$2.41 when trading opened on July 26, but dropped to HK$2.03 by later in the morning. Shares were trading around HK$2.08 in the morning of July 29.

SAIF will sell all of its 208 million shares in the transaction, a 9.5% stake, generating proceeds of HK$375 million. The private equity firm committed $20 million from its third fund to Natural Food, then called Shenzhen Xiangya Food, in 2010.

Natural Food was the second-largest natural health food company in China in 2017, according to Frost & Sullivan; the category refers to packaged food made of natural ingredients with no artificial or synthetic additives. The market is highly fragmented, with the top five players accounting for just 7.6% of the market share in 2017 in terms of retail sales value.

Natural Food manufactures a wide range of food products under the Wugu Mofang brand, the most widely-recognized natural health food brand in China, which claims to combine traditional Chinese dietetic culture with modern nutrition science and food processing technology. The company also operates an integrated distribution platform incorporating both online and offline channels. It had nearly 3,900 concessionary counters in supermarkets across 461 cities in China as of December 2018, along with a presence on major e-commerce platforms and its own WeChat store.

According to Natural Food’s most recent annual report, online sales accounted for 18.7% of revenue for the year ended December 2018, up from 13.1% the previous year. Overall revenue grew from RMB1.6 billion ($229 million) to RMB1.8 billion over the same period, while net profit fell from RMB186 million to RMB105 million. The company raised HK$682 million in its IPO last year.

The acquisition of Natural Food is intended to strengthen Pepsico’s position in the China market by gaining a portfolio of locally relevant products. It resembles last year’s $1.7 billion purchase of South Africa-based Pioneer Foods, which makes a number of food and beverage products marketed throughout sub-Saharan Africa.

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• Topics
• Greater China
• Trade sale
• Consumer
• Hong Kong (China)
• China
• SAIF Partners
• Exit