China-focused CDH Investments Fund Management has reduced its stake in meat corporation WH Group, selling a 10 percent stake in the company for $1.19 billion. When the deal is completed, CDH will have a 19.77 percent share in the Sino-US meat operator, which owns the world’s biggest pork producer, Smithfield Foods.
CDH first invested in WH Group in February 2007, making further investments until 2010 through a succession of seven different funds. The company was listed in 2014 after a delayed public offering that saw profits that underwhelmed investor expectations. WH Group had purchased Smithfield Foods only the year before. Its anchor investor, Temasek, also halved its investment.
The sales agreement has been made with WH Group subsidiary Heroic Zone. The company will hold about 36 percent of total issued share capital when the deal is completed, although shares could be further distributed to investors outside WH Group.
Profits for WH Group rose this year on the back of growing demand for pork as supply tightened. Dwindling domestic supply in China pushed pork prices up sharply in the first half of 2016, according to Rabobank.
CDH Investments Fund Management has also invested in other agribusinesses that were later listed on the Hong Kong stock exchange, including Mengniu and Modern Farming Group. The firm was founded by former China International Capital Corporation staff, including Wu Shangzhi and Jiao Shuge.