Dairy Farm invests in Headland-backed Yonghui Superstore

According to a statement, Yonghui will issue 810 million new shares to Dairy Farm at RMB7 apiece. The transaction is likely to take at least six months to close, given the need for shareholder and regulatory approvals.

Yonghui will use the proceeds to develop its stores, invest in supply chain infrastructure and for potential acquisitions. The two companies will also collaborate in a range of areas, such as procurement, private label product development, fresh food processing and store development.

Dairy Farm runs more than 5,800 supermarkets and health and beauty stores as well as other retail outlets across Asia.

At the end of last year, Yonghui operated 288 hypermarkets and supermarkets across 17 provinces, with over 60% in Fujian and Chongqing, and most of the rest in Beijing as well as Anhui, Jiangsu and Henan provinces. The company posted revenue of RMB30.5 billion last year, while EBITDA was RMB1.5 billion and pre-tax profit came to RMB1 billion.

"Yonghui is a high quality operator that has an unrivalled reputation for its outstanding fresh product offer as well as for bringing innovation and high standards of food quality to the category. We have been deeply impressed with Yonghui's strong management team, its compelling business model and its well established position in several provinces," Graham Allan, Dairy Farm's CEO, said in the statement.

Pan-Asian private equity firm Headland acquired a 24% stake in Yonghui through two rounds of investment between 2007 and 2008. It took the Chinese hypermarket chain public on the Shanghai Stock Exchange in 2010, raising RMB2.64 billion.

In January, the PE firm reduced its stake in the company to 6.65%.

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• Topics
• Greater China
• Consumer
• China
• Headland Capital Partners
• Consumer
• M&A