Bain Capital Circles Chinese Tea Maker

HONG KONG (Reuters) – Bain Capital is in exclusive talks to buy a minority stake in a Chinese tea producer for up to $50 million as the U.S. private equity giant is keen to invest in consumer-driven sectors in China, sources said on Wednesday.

After several rounds of bidding, including from other funds, Bain had entered the final stage of negotiations to close the deal with Beijing Outsell Health Product Development Co Ltd, whose products include the locally well-known Benfit brand of tea, marketed as a weight-loss aid, the sources told Reuters.

Western food and beverage giants, including Nestle AG (NESN.VX) and Coca-Cola (KO.N), have begun selling tea products in recent years to Asian customers.

“Drinking tea, instead of coffee, is getting more and more popular in China and abroad,” said one source.

A Beijing-based executive for Outsell confirmed to Reuters that the company was seeking a private equity investor, but declined to comment further. Bain Capital declined to comment.

No final definite agreement has been inked yet and a deal could collapse if the two parties cannot agree on some specific financial terms, said the sources who declined to be identified as the bidding process is confidential.

Outsell, founded in 2000 and which also exports tea products to the Americas, Europe and Africa, saw its annual sales revenue reach 340 million yuan ($49.77 million) in 2008.

Last month, Bain Capital, which focuses on bigger deals in Western markets, agreed to take up to a quarter of shares of GOME (0493.HK). In China, it is also bidding for a minority stake in Landwind, a medical equipment maker already partly owned by an investment arm of Citigroup Inc (C.N).

By George Chen
($1=6.832 Yuan) (Additional reporting by Samuel Shen in SHANGHAI; Editing by Valerie Lee)