KKR-led consortium to acquire 70% stake in Chinese pork company

A consortium of investors comprising KKR, Baring Private Equity Asia, HOPU and Boyu have agreed to invest around $270m for a 70% stake in integrated pork company COFCO Meat, a subsidiary of China’s state-run COFCO Group.

KKR is the leading investor in the consortium with an investment of around $150m, reported Reuters citing undisclosed sources.

COFCO Meat plans to use the fund to build and manage large-scale industrialised hog farms and meat processing plants in China.

COFCO Meat is involved in hog and poultry production, processing, distribution, and meat imports and exports, and was established less than five years ago.

COFCO Meat distributes its fresh meat and processed meat products under the Joycome and Maverick brands.

With this move, the investors are seeking to take advantage of the expected increase in large-scale farms.

According to the US Department of Agriculture and the China Animal Industry Yearbook, China accounts for about 50% of global pork consumption; however, large-scale farms with an annual output of 50,000 or more hogs contribute less than 1% of the total domestic supply.

By 2020 large-scale farms are expected to increase by more than six fold due to their food safety and quality control capabilities, and their greater operational efficiency compared with small-scale farms.

COFCO Group chairman Ning Gaoning said that bringing in the four strategic investors is a way for COFCO to diversify its equity ownership and enhance its corporate governance.

"We look forward to creating synergies among the shareholders to improve the operations and management of COFCO Meat, and together grow COFCO Meat into a much bigger actor in China’s meat industry," Gaoning said.

COFCO Group vice president and COFCO Meat chairman Ma Jianping said, "The investment is a recognition of our past achievement and future potential, and we believe these investors’ extensive global networks, professional local teams and deep operational experience will accelerate COFCO Meat’s strategic goal to become the leading provider of China’s safe meat products."