Goldman Sachs has agreed to sell half of its holding in Shineway Group, China's top meat processor, to a Chinese fund for about $150 million, earning roughly five times its investment from the landmark 2006 deal, sources with direct knowledge of the matter said on Wednesday.
The acquisition attracted wide public interest in 2006, in part because it involved foreign investors taking a stake in a national brand and industry leader. It was also among the first leveraged buyouts in China by a group of foreign investors, which included Singapore's state investor Temasek Holdings TEM.UL.
Sources said the Asia Special Situation Group (ASSG) of Goldman Sachs signed a deal last week to sell part of its stake in Shineway to CDH Investments, an influential Chinese private equity fund and already a major shareholder of the meat processor. Shineway, well known in China for its sausage products, has a listed arm, Henan Shuanghui Investment & Development Co Ltd.
ASSG was one of Goldman's best and fastest profit streams in the region, but its prominence within Goldman has faded since the financial crisis. Several ASSG star bankers, including its co-head Zhang Yi, have left the firm.
ASSG is now under pressure to improve its performance. After all, it is not a long-term investor for such deals like Shineway either, said one source.
But CDH has long-term commitment to Shineway given its strong Chinese background and good relations with the government, he added.
CDH Investments, established in 2002, is a spin-off from China International Capital Corp, the investment banking joint venture one-third owned by Morgan Stanley.
Shineway, Goldman Sachs and CDH declined to comment. The sources declined to be identified because the sale process is private and confidential.
THREE YEARS; FIVE TIMES
Goldman's sale of the stake will bring its holding in the parent to roughly 5 percent down from around 10 percent, according to the sources.
Including leverage used for the transaction, Goldman will earn around five times its investment through the sale of its Shineway stake, one source said.
After the deal, CDH would become No.2 shareholder of Shineway, in which the management of Shineway would remain its control, said the sources.
Temasek and New Horizon, a U.S. dollar private equity fund run by Wen Yunsong, the son of Chinese Premier Wen Jiabao, would also remain as key shareholders, the sources added.
In late 2006, a consortium-led by Goldman's ASSG and CDH bought control of Shineway Group for $256 million, beating rival bidders including CCMP Capital Asia at that time.
Financial details were not fully disclosed at the time but the sources said Goldman paid about $75 million for a stake in Shineway.
The deal, which sparked debate from Chinese media and scholars on whether the national industry leader was sold too cheaply to foreign investors, won Beijing's approval at the end of 2006. Buyout deals remain very rare in the Communist nation.
(Editing by Lincoln Feast)