PE-backed ZhongDi Dairy targets $65m Hong Kong IPO

The company will sell approximately 391.1 million shares for as much as HK$1.30 apiece, according to a filing. CITIC Capital and Vertex Investment, which have stakes of 7.61% and 1.63%, respectively, will not make partial exits, although their holdings will be diluted due to the issue of new shares.

ZhongDi was established in 2002 by three Chinese executives - Jianshe Zhang, Kaizhan Zhang and Dai Liu, each of whom remains involved in the business in a management or investor capacity - with experience in animal husbandry and dairy cow trading. Its first farm began operations in Inner Mongolia in 2003 and a raw milk supply agreement with Mengniu started a year later.

The company is now the 11th largest dairy farming company by herd size and ranks 18th in terms of raw milk sales volume. As of June, it operated four dairy farms and three more under development, with a total of 37,160 Holstein cows.

Average per capita milk yield was 10.8 tons in 2014 compared to a national average of 5.5 tons. Total milk output for 2014 was 63,099 tons, up from 30,637 tons in 2013. The company signed 10-year cooperation agreements - that include off-take clauses - with Mengniu and Yili last year.

ZhongDi is also the third-largest importer of dairy cows in China, according to Frost & Sullivan, with a market share of 18.1%.

CITIC and Vertex participated in ZhongDi's third round of equity financing in April 2012. They were part of an investor group that committed RMB130 million ($20.4 million) to the company. There have been four rounds of funding in total, worth close to RMB400 million, most of it from non-institutional sources.

ZhongDi generated RMB721.55 million in revenue in 2014, up from RMB309.1 million the previous year. Net profit reached RMB152.3 million, up from RMB81.5 million.

Morgan Stanley and China Merchants Securities are joint leader managers for the offering.

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• Topics
• Consumer
• Greater China
• Exits
• Exit
• IPO
• China
• Consumer
• CITIC Capital
• Vertex Management (II)