Carlyle backs Chinese feed producer with $175m

The global private equity firm will acquire a minority stake in CP Pokphand from Thai agribusiness conglomerate Charoen Pokphand Group.

The Carlyle Group will invest $175 million in CP Pokphand, one of China’s largest livestock and aqua feed producers, for a stake of 11.3 percent. Carlyle will acquire the stake from CP Pokphand’s largest shareholder Charoen Pokphand Group (CP Group), which is Thailand’s largest agribusiness conglomerate, the firm said in a statement.

The firm is making the investment from Carlyle Asia Partners III, a $2.55 billion buyout fund focused on Asia ex-Japan which closed in April.

The investment will be made through the acquisition of 2.27 billion convertible preference shares, and Carlyle also has the possibility of acquiring additional convertible preference shares in future under certain circumstances. CP group will also grant Carlyle approximately 324 million options, each carrying the right to acquire one convertible preference share in CP Pokphand at HK$0.6 (€0.06; $0.078) per share.

Assuming Carlyle does not receive further shares or exercise its options, it will own a stake of about 11.3 percent in the company, the firm said.

CP Pokphand is the investment arm of CP Group in China. It is the country’s leading feed producer and is known for developing new feed formulae and providing animal feeds to farm operators across the country. The company has a significant presence in 26 provinces and municipalities in China with more than 26,000 exclusive product distributors.

CP Group will use part of the investment to partially prepay intercompany debt to CP Pokphand. The company is owed $288 million and CP Group intends to pay about $150 million of this amount before the end of 2010.

“Carlyle sees great growth potential in China’s agriculture sector and believes the rapidly expanding middle class, increasing demand for quality food supply, as well as heightened awareness of food safety and dietary issues, will underpin future growth in the sector,” Patrick Siewert, senior director of Carlyle, said in a statement.

CP Group is one of Thailand’s largest business conglomerates with interests in agribusiness, retail and telecommunications and is currently the world’s largest independent feed producer. At the end of 2009, CP Group’s sales stood at about $25 billion.

UBS was the financial advisor to CP Group.

Less than a fortnight ago, Carlyle said it would invest up to S$266 million (€155.4 million; $190 million) in China Fishery Group, a Singapore-listed industrial fishing company, for a stake of about 13.6 percent.