Lunar Capital Buys $100M Stake in China’s Yeehoo Group

China-focused buyout shop Lunar Capital is paying $100 million for a controlling stake in Chinese baby products maker Yeehoo Group Ltd., Reuters reported Wednesday. The company has more than 650 stores across 138 of China’s cities, Reuters wrote.

(Reuters) – Lunar Capital, a China focused private equity fund, will pay close to $100 million to buy a controlling stake in China’s Yeehoo Group Ltd, a baby products maker, a source familiar with the matter told Reuters on Wednesday.

Yeehoo’s existing management team, which held a significant minority stake prior to the closing of this transaction, will retain a minority stake, Lunar said in a statement. Lunar did not disclose the financial details of the transaction.

China’s child-related products market is forecast to reach about $49 billion by 2013 from $9 billion in 2005, according to Frost and Sullivan estimates. The industry has clocked an annual growth rate of 22 percent between 2005 and 2009, helped by rapid urbanisation and increasing disposable income.

That has attracted some investors into this sector.

In September, RRJ Capital, the newly formed $2.4 billion Asian private equity firm founded by Richard Ong, and a unit of Hong Kong’s Cheung Kong conglomerate has invested $80 million in AAB, a Chinese maker of baby diapers.

Private equity fund Pacific Alliance Group acquired China’s largest baby stroller maker, Goodbaby in 2006 for US$122.5 million, in one of the mainland’s first leveraged buyouts. Pacific Alliance listed the company on the Hong Kong exchange in November 2010.

Established in 1995, Yeehoo designs, develops, produces and distributes high quality mid-to-high end baby products targeting infants to 4 year olds under their Yeehoo brand.

The company has more than 650 stores across 138 of China’s cities, the statement said.

“Spending on babies in China is very robust and it’s a defensive sector. “It’s a function of rising consumer power in China,” Derek Sulger, a partner at Lunar told Reuters. “We hope to double the company’s store presence in the next three to four years,” Sulger added.

Sulger said his fund has no immediate plans to exit the business. “It is not the kind of business we are looking to get into and flip out in two to three years,” he said. (Reporting by Denny Thomas and Stephen Aldred; Editing by Jacqueline Wong)