Lunar Capital Management announced Thursday that it has acquired a majority stake in a Guizhou-based beef jerky producer, signaling a foreign private equity (PE) firm's penetration into a 29-year-old family enterprise based on its confidence in the country's growing consumer market.
After buying a majority stake in Guizhou Yonghong Food Co, Lunar aims to develop its Bullhead brand beef jerky business, the PE firm told reporters in Huishui, Southwest China's Guizhou Province.
"Our current and subsequent capital injection into the company will be about $50 million," Derek Sulger, managing partner of Lunar Capital, told the Global Times Thursday.
Lunar has appointed a new CEO to manage Yonghong, and Sulger vows not to cut any of the 1,200 current positions in the Huishui-based factory. The three co-founders of the beef jerky producer, who retain a minority stake, will be faded out of the company's new management team.
In China, it is unusual for a family enterprise's founders to hand over the company's management to an outsider.
"After over 30 years running this business, it is time that my partners and I pass the baton to someone who is better placed, more international and has a greater understanding of today's dynamic market," Tang Kelin, a co-founder of Yonghong, said Thursday.
Speaking about the company's strategy, Sulger said he aims to expand the company's annual production, develop more products, export products to overseas markets, and get the company listed publicly.
Yonghong, with an annual sales revenue of 300 million yuan ($48.5 million), and Chengdu Bangbangwa Industry Co are the two leading beef jerky producers in China, where the snack food market was worth 77 billion yuan in 2012, according to researcher Euromonitor International.
"Yonghong needs money to expand its product line, and Lunar can get a good return on investment once the company gets listed," Liang Mingxuan, a food industry analyst at Shenzhen-based CIC Industry Research Center, told the Global Times Thursday.
"But overall, the capital market has weak sentiment on China's food companies, due to a series of food safety scandals exposed in recent years."