
China-backed Oatly raises $1.4b in US IPO

Oatly, a Swedish oat-based, dairy-free beverage brand backed by a joint venture between China Resources Group and Verlinvest, raised $1.43 billion in its US IPO, facilitating partial exits for several investors.
The company sold approximately 84.4 million American Depository Shares (ADS) – including 64.7 million held by existing investors – for $17 apiece, according to a statement. There is an overallotment option of 12.6 million ADS. The stock gained 18.8% on its NASDAQ debut on May 20, closing at $20.20. As of early afternoon on May 21, it was at $22, giving Oatly a market capitalization of $13 billion.
China Resources Verlinvest Health Investments, a 50-50 JV between China Resources and Verlinvest, an investment firm established by the founding families of the Anheuser-Busch InBev brewing empire, backed Oatly in 2016 with a view to taking the company into markets like China and the US. The JV realized $264.7 million via the IPO, reducing its stake from 55.9% to 47.6%.
There were smaller partial exits for US-based Coefficient Capital, German specialist food investor Oyster Bay Venture Capital, and RI Investments in the Netherlands, as well as multiple individual investors, including some of the founders, the prospectus shows.
The Blackstone Group is the second-largest shareholder after the China Resources-Verlinvest JV with 6.7%. It led a consortium that invested $200 million last year at a valuation of $2 billion. The deal also featured Oprah Winfrey, Natalie Portman, an entertainment company founded by Jay-Z, and former Starbucks CEO Howard Schultz. Chinese private equity firm CPE invested in Oatly in 2020 as well.
Oatly was established in Sweden by a group of scientists at Lund University who were exploring the mechanisms and effects of lactose intolerance. This led to the development of its core oat technology and the launch of the first oat milk product in 2001.
The company claims to be the world’s original and largest oat milk company with a product portfolio that includes milks, ice cream, yogurt, cooking creams, spreads, and on-the-go drinks. As of year-end 2020, its distribution network comprised 60,000 retail outlets and 32,200 coffee shops.
It entered China in 2018 through the specialty coffee and tea channel, achieving rapid scale through an e-commerce partnership with Alibaba Group and an exclusive branded partnership with Starbucks. There are now 9,500 foodservice and retail points of sale in the country, including 4,700 Starbucks locations.
Asia is an increasingly important part of Oatly’s business. The region accounted for $54 million – or 13% - of the company’s $421 million in overall revenue for 2020, up from 1.7% in 2018 and 4.9% in 2019. Europe, the Middle East and Africa (EMEA) remains the largest market, contributing 64% of sales last year, although the Americas share has more than doubled to 24% over the past two years.
Meanwhile, Oatly’s overall revenue has more than doubled in the past 12 months, rising from $204 million in 2019. The company’s net loss also widened from $35.6 million to $60.4 million.
Global plant-based dairy industry retail sales were $18 billion in 2020, according to Euromonitor International, representing 3% of the global dairy industry. Nielsen estimates that oat milk sales in the US rose 203% in 2020, establishing it as the second-largest dairy alternative after almond milk. In the UK, oat milk took top spot, following a 98% jump in sales.
The prospectus includes a material adverse effect clause that would see Oatly pursue ad additional listing in Hong Kong should regulatory action in the US limit the ability of China Resources to appoint directors and share information with affiliates or result in the state-owned company being forced to divest its interest. These are generally seen as potential outcomes if the Committee on Foreign Investment in the US (CFIUS) detects unresolved national security concerns in an investment.
Moreover, if the Asia Pacific share of Oatly’s revenue exceeds 25% for two consecutive quarters at any point after the second anniversary of the US IPO, a Hong Kong listing process could be triggered at the request of China Resources.
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