Yeoman’s work for Carlyle

The stake was purchased through a PIPE deal from Charoen Pokphand Group (CPP), Thailand’s largest agribusiness conglomerate. UBS AG and Davis Polk & Wardwell LLP acted as financial advisor and legal advisor to CP Group.

As part of the deal, Carlyle will provide strategic input t the board level, help strengthen financial control and planning, and leverage Carlyle’s global experience in the food sector to help improve operations.

Pokphand made $2 billion in revenue in 2009 distributing, swine, poultry, cattle and fish feed. The investment was driven by the demand for livestock feed and increased global meat consumption. Dhanin Chearavanont, Chairman of CP Group and CPP added that the feed industry is going through a dynamic period of growth driven by a global demand for higher quality food and more stringent safety standards, particularly in developing countries like China.

Earlier this year, Cao Zhi, director at the China National Grain & Oils Information Center, noted that the gain in China’s meat consumption is closely related to its GDP growth.
Carlyle’s spokeswoman echoed this trend as the backbone of the investment, telling AVCJ, “We believe in the growing Chinese economy, especially domestic consumption and the consumer products and services sector, broadly speaking. These positive dynamics will continue to drive the demand for food and agriculture products.”

Both parties also expect that there will be space for animal protein consumption to grow as a portion of CPP’s business, as the current consumption level in China is still well below that of most developed countries. CPP added that the demand for animal and aqua feed products will increase with the growth of disposal income in China.

The CPP investment marks the third by Carlyle in the agriculture and food industry, following the $190 million PIPE deal for a13.62% shares of industrial fishing company China Fishery Group Ltd – listed in Singapore last month – and a straightforward private investment for a 17.3% stake in Guangdong Yashili Group Co., Ltd., one of China’s largest infant-formula companies.

PIPEs continue to be a widely contested deal form, however in this case Carlyle’s spokeswoman explained, “The China feed industry is consolidating,” in line with the Chinese government’s push to improve safety standards, “and we believe the larger and more established players will be long-term winners.  Most of these larger players are already listed.”

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• Topics
• Greater China
• Expansion
• Consumer
• The Carlyle Group