January 8, 2008

 

Acquisition allows Chinese pig processor to list in US

 

 

On December 31, 2007, Nevada-based Energroup Holdings Corporation, acquired Dalian-based Chuming, a Chinese pork processing company in a move designed primarily to allow the processor to publicly list in the US.

 

Energroup Holdings, which had no significant holdings prior to the purchase, is traded over the counter.

 

Through its purchase of Chuming parent, British Virgin Islands-based Precious Sheen Investments Ltd (PSI)., it is acting as a vehicle to allow shares in the pork processor to be traded in the US.

 

The pork processor's sales in 2006 reached US$70.4 million in 2006 and by the third quarter in 2007, sales have already reached US$89.7 million.

 

The acquisition was accomplished by means of a share exchange in which the former shareholders of PSI were issued a controlling stake in Energroup Holdings.

 

Dalian Chuming, with its Chuming brand food products, is the second largest pork processor in both the Liaoning Province and the Northeast Region in China. 

 

The ISO 9001 and HACCP certified company maintains industrialised hog slaughtering, processing and distribution facilities.

 

Chuming, with its integrated pork production "cold food" chain is the first company in China's meat industry to receive "Green Food" Certification from the Ministry of Agriculture. 

 

The "Green Food" status is conferred upon companies who produce food using environmentally sustainable methods and meet certain technical standards of quality control, low levels of pollution, safety, and product quality.

 

Chuming markets its fresh, frozen and packaged meat and deli products directly to thousands of retail outlets in China such as Wal-mart, Metro, and Carrefour, and also sells its products in 500 free-standing franchise locations.

 

Simultaneous with the acquisition on December 31, 2007, Energroup also completed a private placement with institutional investors led by Pinnacle China Fund, L.P. which resulted in gross proceeds to the Company of US$17.0 million through the issuance of 3,863,636 million shares of common stock, which represents an approximate 18-percent stake in the Company.

 

As part of the private placement, management entered into a "make good" provision whereby it placed 3,863,636 million of management's shares into an escrow to secure its obligations to meet specific future after-tax net income targets.  

 

In the event the Company does not achieve its earnings targets of US$15.9 million in after-tax net income ("ATNI") for 2008, and US$20.9 million in ATNI and fully-diluted earnings per share of US$0.99 for 2009, then 1,931,818 million shares held by management, respectively for each year will be transferred on an all-or-none basis to the investors in the private placement on a pro-rata basis.

 

For the nine months ending September 30, 2007, Chuming recorded unaudited sales of US$89.7 million and net income of US$8.3 million, compared to sales of US$50.2 million and net income US$6.3 million for the first nine months of 2006.

 

Shi Huashan, CEO of Energroup and president of Chuming said the proceeds will be utilized for working capital, to expand production capabilities to meet growing market demand, and to broaden the company's distribution footprint to include cities surrounding Dalian City, where the company has captured a 50-percent market share in the fresh pork market.