Lunar Capital has bought a controlling stake in Chinese snack food maker Guizhou Yonghong Food, according to a company statement.
The deal was valued at $50 million, scaled in over time, and represents about a 65 percent stake, Derek Sulger, Lunar managing partner, told Private Equity International.
Yonghong, established in 1984 and headquartered in the city of Guiyang in the southwest of China, supplies processed beef products such as beef jerky under the brand name of “Bullhead” or “Niutou” to 28 provinces.
Sulger said his firm intends to put Yonghong on a growth path, modernising its distribution channels, to include online distribution, diversifying the product line, and selling the products in Southeast Asia.
The way we compete in China is generally on our ideas and willingness to roll up our sleeves and help the company. An enormous amount of businesses all over China need this help
“The way we compete in China is generally on our ideas and willingness to roll up our sleeves and help the company,” Sulger said. “An enormous amount of businesses all over China need this help.”
Lunar’s operations team will take over the management of the business and work closely with the three co-founders of Yonghong, who retain a substantial minority stake, the statement said.
Eric Yiming, a Lunar partner, will lead the integration process and be seconded to Yonghong as CEO. Yiming has 25 years of experience in the consumer sector and has assumed key executive positions in Asia, managing well-known brands including Marlboro, Heineken, Tiger Beer, Tropicana and Dole Juice.
Sulger will become chairman of Yonghong. He sees the potential for synergy with Lunar’s investments in another meat processing business and two food and beverage companies in China.
In addition, Lunar Capital will open a new office in Guizhou Province to provide staffing and support to Yonghong.
China’s food industry is viewed with suspicion due to several food safety scandals over the last several years, some of which resulted in deaths. Sulger, however, believes Yonghong has a high commitment to quality and safety, reflected in the company culture and popularity of its branded products.
“Now is the time you should buy companies that have systems and processes [to ensure food safety] in place as well as a culture of addressing those problems,” he said.