Henan meat processor Shuanghui up for sale
By Zhang Lu (China Daily)
Updated: 2006-03-04 08:32

Henan Shuanghui Group, a leading meat-processing company in China, went up for sale on Friday on the Beijing Equity Exchange.

Henan Shuanghui Group, located in Luohe, in Central China's Henan Province, was established in August 1994.[newsphoto]

The Luohe State-owned Assets Supervision and Administration Commission decides to sell its wholly owned company to international investors through public bidding, according to information from the exchange.

Media reports said earlier that foreign private equity groups had shown interest in the deal, including JP Morgan Partners and American International Group Inc, as well as Singapore's Temasek Holdings.

The reports also said that the deal may value the group at US$800 million.

"The deal price should be equivalent to 40 to 50 times the price-earnings ratio of Shuanghui Group," said Dong Junfeng, an analyst for Galaxy Securities.

Information from the Beijing Equity Exchange shows the group had a turnover of 99.01 million yuan (US$12.2 million) and a net profit of 107.31 million (US$13.2 million) in 2005.

The deal value will also include compensation to tradable shareholders of Shenzhen-listed Shuanghui Investment & Development Co, in which the group holds a 35.72 per cent stake, and the deal also involves a transfer of the listed company's non-tradable State-owned shares, Dong added.

Trading of Shuanghui shares has been suspended from Friday, as a share transfer may have a significant impact on share prices, the Shenzhen-listed company said in a statement to the stock exchange.

Its share price rose by 5.66 per cent to close at 18.48 yuan (US$2.28) on Thursday.

The listed company reported revenue of 13.46 billion yuan (US$1.66 billion) and a net profit of 371 million yuan (US$45.8 million)

"The meat producer has a good business performance and has huge development potential," Dong said.

Shuanghui Group is ranked 131st among China's top 500 large-scale enterprises and is No 1 in the food- processing industry.

It holds more than half of the country's high-temperature processing meat products market.

The Shuanghui brand is valued at 10.6 billion yuan (US$1.3 billion).

Industry insiders worry that the equity transfer may give up the huge market to foreign companies, although the Luohe State-owned Assets Supervision and Administration Commission requires that buyers continue to use and develop the Shuanghui brand and help promote the brand's popularity in the international market.

It also requires that potential buyers would not associate with other meat processors in China.

The public bidding will be closed on March 30.

"It is expected that the equity transfer of Shuanghui Group and the share reform of its listed arm will be completed by the end of June," Dong said.

However, the State-owned Assets Supervision and Administration Commission of the State Council and the China Securities Regulatory Commission still must approve the deal.

(China Daily 03/04/2006 page5)