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July 9, 2010
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Carlyle closes deal with CP Pokphand Co.
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The Carlyle Group has agreed to buy an 11.3%-stake in animal-feed maker CP Pokphand Co., one of Thailand's biggest agricultural companies, for US$175 million.
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CP Pokphand is one of China's major suppliers of animal-feed products and has benefited in recent years from rising household income in the country, allowing people to afford a greater variety of food.
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As China rapidly urbanises, meat demand continue to rise. There is also a drain of farm labourers into cities, which has pushed farmers to boost productivity, in part by using commercial feed. Food scares have prompted the Chinese government to support larger-scale farming and the use of commercial animal feed.
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"China should follow the global pattern where farmers move from small- to large-scale farming and use more commercial feed," said Patrick Siewert, a senior director at Carlyle.
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Small-holders that used to gather animal feed themselves are disappearing while larger farms are buying commercially made feed to bulk up animals more efficiently. About 30% to 35% of total feed used in China is commercial feed, and the balance is home-made feed, according to consultants at Bain & Co.
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"The Chinese currently eat a much larger proportion of vegetable protein than in the US and Europe, but they are gradually buying more pork, fish and poultry. They now eat about 33 grams of animal protein daily, compared with about double that in most of the developed world," Mr. Siewert said.
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CP Pokphand had about US$2 billion in revenue last year from distributing, swine, poultry, cattle and fish feed, according to the consultancy reports. The fastest-growing segment was fish feed, reflecting the growing number of fish farms in China after wild-fishing plateaued globally around the turn of the century.
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Carlyle has also acquired a 13.62%-stake in Singapore-listed China Fishery Group Ltd. for US$190 million last month and a 17.3% stake in Guangdong Yashili Group Co., Ltd., one of China's largest infant-formula companies, for an undisclosed sum in September 2009.
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Carlyle is buying the stake from Charoen Pokphand Group, Thailand's biggest agricultural company by sales and one of the world's biggest poultry exporters. CP Pokphand, which trades on the Hong Kong stock market, is Charoen Pokphand's investment arm in China. Charoen Pokphand still owns about 70% of CP Pokphand on a fully diluted basis.
