Affinity backs poultry producer in debut Malaysia deal

Leong Hup is the largest integrated poultry producer in Malaysia. The company started out as a backyard farm in the 1960s and incorporated in 1979. Its operations cover the entire supply chain, from producing feed and parent stock and rearing day-old chicks through to contract farming, slaughtering and processing meat. Leong Hup also supplies feed, parent stock and day-old chicks to smaller-scale independent farmers.

The company is also the market-leading chicken supplier in Singapore and ranks second and third respectively in Vietnam and Indonesia on the upstream side, chiefly providing feed, parent stock and day-old chicks to independent farmers. A processed foods division was launched in Indonesia last year.

The Malaysian business, Leong Hup Holdings, listed on the Bursa Malaysia in 1990 but was taken private by the family owners in a process that ended in early 2012 because the stock was illiquid. The deal was worth around MYR427 million ($130.5 million). The last quarterly financials posted by the company were for the final quarter of 2011. Revenue came to MYR440.1 million and net profit was MYR30 million.

The Indonesia business, Malindo Feedmill, remains listed on the Jakarta Stock Exchange. It recorded net sales of IDR4.2 trillion ($345 million) in 2012, up 25% year-on-year, while net income fell 20% to IDR241 billion. This was mainly due to foreign exchange losses.

According to a source familiar with the situation, Affinity began talks with Leong Hup towards the end of the take-private process in Malaysia. For the purposes of the investment, Leong Hup's operations have been consolidated under a single holding company in which the private equity firm now holds a stake.

"The family owners wanted to bring in an institutional partner as part of their long-term succession planning," the source added. "They wanted to institutionalize the company so that it can transition from being family-run to being professionally-run."

Affinity is also expected to support expansion within Southeast Asia, which will start with the deepening of the company's presence in Vietnam and Indonesia as well as consolidating its position in Malaysia.

The private equity firm is currently investing its fourth pan-Asian fund, which closed earlier this year at $3.8 billion. 

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• Topics
• Expansion
• Southeast Asia
• Industrials
• Consumer
• buyout
• Affinity Equity Partners
• Consumer
• Agriculture
• Southeast Asia
• Malaysia