Navis sells duck business to Chinese asset managers in $183m deal

The Malaysian firm’s Fund V was generating 8% net IRR as of September last year.

Navis Capital Partners has sold its controlling interest in duck genetics provider Cherry Valley Farms to Beijing Capital Agribusiness and CITIC Agri Fund Management.

Financial terms were not disclosed but media reports have valued the deal at $183 million.

Navis’s investment into Anatis UK, Cherry Valley’s holding company, was made in 2010 in conjunction with Rabobank-spinout Nordian Capital Partners through UK and China-based portfolio company Bangkok Ranch.

The partners had previously acquired Bangkok Ranch, an integrated duck meat producer, in 2007, when they helped fund its merger with Dutch duck slaughterhouse Tomassen Duck-To. They held on to Cherry Valley when they exited Bangkok Ranch in 2013 for $200 million, netting them a 1.9x return on money invested.

The investment was held in Navis Asia Fund V, which was generating a net IRR of 8 percent as of September 2016, according to a document by the California State Teachers’ Retirement System. The firm is currently deploying its $1.5 billion Asia Fund VII.

In July, Navis said that it wanted to create a “side-pocket” within its future buyout funds to make 10-15 smaller investments in the $10 million-$50 million range – alongside its usual $50 million-$150 million deals – to go “deeper and smaller” into South-East Asia.

The Cherry Valley sale comes a year after Chinese conglomerate CITIC established its Agri Fund platform alongside Yuan Longping High-Tech Agriculture – a company in which it is the controlling shareholder – and two other China-listed agriculture companies. In July, CITIC used $1.1 billion from the vehicle to acquire Dow’s corn seed business.

Beijing Capital Agribusiness was founded in 2009 through the merger of Beijing Sanyuan, Beijing Huadu Group and Beijing Dafa livestock Corporation, resulting in an entity with 66 billion yuan ($10 billion; $8.4 billion) under management.

Founded in 1959, Cherry Valley breeds and provides genetics for Pekin ducks, claiming a “dominant global market share” of this market. It runs facilities in England, Germany and China, where the company says that it has 2.5 billion ducks.

“With a long history of investing in multispecies breeding, we are redoubling expansion in this sector with an aim to become the foremost animal genetic business in China, the fastest-growing and largest animal protein market globally,” said Beijing Capital Agribusiness vice-chairman Liu Jiantong.

Nordian said “specific actions” taken to grow the company had included “significant investment in new technologies, additional breeding facilities and the recruitment and promotion of key senior managers and genetics expertise.”

In its 2016 annual report, Bangkok Ranch listed “risk of parent stock supply” – ducks producing fertilized eggs – among potential threats to its business. The company wrote that it had moved to diversify its sources of genetics by contracting with an additional unnamed European supplier, although it noted “only a few companies in the world” specialize in such parent stock development.

“In the past, the company only chose to use Cherry Valley species of Cherry Valley Farms from England as this species grows fast with good rate of weight and meat resulting in good output and inefficiency,” the report’s authors wrote. “However, the company presently realizes the risk of depending on a single supplier, so the company purchases parent stock from other species developers to reduce such risk.”

Additional reporting by Matthieu Favas