China-focused private equity fund Lunar Capital is to pay up to $50 million for a majority stake in food company Sichuan Zhiqiang Food Co, writes Reuters. The deal value has not been disclosed.
Reuters – China-focused private equity fund Lunar Capital has agreed to pay up to $50 million for a majority stake in privately held food company Sichuan Zhiqiang Food Co Ltd, according to a source with knowledge of the matter, placing a bet on the growth of home-grown consumer brands in China.
Lunar Capital believes that rising consumer spending power will benefit strong consumer brands, such as those sold by integrated food maker Sichuan Zhiqiang, the firm said in a statement, which did not give a dollar value for the deal.
“We believe that the power of the Chinese consumer will continue to outpace the generally-accepted assumptions, particularly the rise of the consumer in central and western China,” said Derek Sulger, a partner at Lunar Capital.
As part of the deal, Lunar Capital’s Simon Liu will become Sichuan Zhigiang’s CEO. Lunar Capital will also hold a majority of the board of directors, and appoint the company’s chairman.
Control deals are rare for private equity investors in China, where entrepreneurs prefer to maintain control of their businesses and usually offer only minority stakes.
However, this is Lunar Capital’s second control deal this year. In January, the firm was said to have agreed to pay close to $100 million to buy a controlling stake in China’s Yeehoo Group Ltd, a baby products maker.
Lunar Capital has nine funds in its portfolio and has invested across consumer goods, consumer services and agriculture-related products.
The source was not authorised to talk to the media. (Reporting by Stephen Aldred; Editing by Kim Coghill)