Deal focus: Navis’ Asia poultry play takes flight

Even for two China-based food conglomerates, Cherry Valley Group (CVF) may seem like an unlikely investment choice. But Beijing Capital Agribusiness Group and CITIC Agri Fund Management saw the duck breeder and genetics supplier as a way to satisfy a considerable home-grown demand.

“Nine in 10 of all Peking ducks in the world are consumed in China,” says David Ireland, a senior partner with Navis Capital Partners, which recently sold CVF to the firms for an undisclosed amount. “They felt like it was bringing something home, even though the business was born and cultivated in the UK.”

Navis had known CVF for some time before buying it. The GP considered an acquisition in 2003 but didn’t follow through, and following the acquisition of Thailand-based duck processor Bangkok Ranch in 2007, it became a customer. CVF supplied duck genetic stock to Bangkok Ranch. Navis saw considerable growth potential in the company, particularly in Asia, but its legacy operations and lack of a clear strategy were holding it back.

“If you're in ducks and duck genetics, you have to have some interaction with China. Cherry Valley had made some moves, but it’s a long way from Lincolnshire to penetrate China,” Ireland says. “There was a huge growth opportunity with a superior product, but they were running in a rural UK environment.”

Navis’ chance came in 2010, when CVF, having resolved its financial difficulties, began to approach potential buyers again. The firm’s willingness to take on both the legacy duck processing business and the more novel genetics operation proved the deciding factor, and it bought a controlling stake through Bangkok Ranch – which later reverted to Navis when the firm sold Bangkok Ranch in 2013.

The GP saw its main value proposition as its ability to reshape the business for the Asia market. When CVF’s CEO stepped down a year after the acquisition he was replaced by the company’s head of China, who had played a role in building a distribution network in the country.

Navis also streamlined CVF by selling the legacy processing division to another UK poultry player, freeing up management to focus on the genetics operation. Navis had already hired a new chief geneticist, and now moved her team from the previous breeding facility, located at the processing plant, to a new, modern headquarters.

Seven years later, CVF’s new course has brought it recognition in its most exciting market. Navis sees its 2.8x money multiple as a vindication of its patient approach.

“All agriculture businesses are up and down – we had a very good position, but every year you have a host of challenges with feed costs and markets and all the rest,” says Ireland. “But we were able to navigate those, and when we did get to the market, between a really dominant position, an established management team and a good reputation, the asset was very sought after.”

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• Topics
• Europe
• Greater China
• Trade sale
• Industrials
• China
• Navis Management
• Exit
• Agriculture