CONSUMER – Bright Offers China Food For Global Investors
Bottom line: Bright Food’s overseas IPO plans for its British Weetabix and Australian Manassen brands could get lukewarm response due to investor skepticism about their growth prospects.
I’ve watched with interest over the last 2 years as Shanghai-based Bright Food has quietly gobbled up a stream of high-profile global investments, positioning the company to potentially become one of China’s first international consumer brands to rival giants like Procter & Gamble (NYSE: PG) and Kraft Foods (Nasdaq: KRFT). Now we’re getting further details of Bright’s growing global aspirations, with word that it’s planning a series of international IPOs including potential major listings in Hong Kong and London.
The source for these latest reports is one of the company’s vice presidents, who was detailing Bright’s longer-term financial roadmap at a press conference in China. As a resident of Bright’s hometown of Shanghai, I have to quickly give my view that Bright seems like a relatively well-run company but also one that’s prone to city politics. But that’s probably true of any major Chinese firms, and in this case the Shanghai government is clearly supporting Bright in its recent multibillion-dollar global acquisition spree.
According to the latest headlines, Bright would seek individual IPOs for one or more of its recent major acquisitions in their home markets. Two potential deals include a London IPO for Bright’s Weetabix breakfast cereal unit, and an Australia-based IPO for its Manassen Foods, both of which could come by 2016. (English article) Bright bought 60 percent of the UK’s Weetabix in 2012 for about $1.1 billion, and bought 75 percent of Australia’s Manassen a year earlier for nearly $400 million.
Bright Vice President Ge Junjie said the company would maintain control of any units that make separate IPOs, but declined to give any specific fund-raising targets. Such offerings look smart from both a financial and public relations perspective. Financially they would help Bright recoup some of the billions of dollars it is spending on its global expansion. From a PR perspective, re-listing the firms in their home markets would allow regional investors to buy into these well-known local brands. Bright could follow these local IPOs with another local listing for leading Israeli dairy firm Tnuva if and when it closes its deal announced in May to buy 56 percent of the company for $1.4 billion.
In addition, Bright would also consider listing Weetabix, Manassen or some of its other global assets in Hong Kong, Ge said. I could also see Bright also listing the entire company in Hong Kong as part of a dual listing in Hong Kong and Shanghai. That would help to raise its profile, which is important for a consumer company, and also give it access to global capital markets to fund its international expansion.
The roadmap outlined by Ge puts Bright in a similar category with local dairy Mengniu (HKEx: 2319) and meat processor WH Group (HKEx: 288), 2 other major Chinese food firms that are developing their own globalization strategies. Mengniu is building an increasingly cozy relationship with French food giant Danone (Paris: DANO) through a series of big tie-ups over the last year, while WH Group last year made headlines with its purchase of US pork giant Smithfield and a subsequent IPO in Hong Kong.
In this case WH Group’s IPO provides an interesting case of what kind of performance we might expect from a future listing by Bright Food or any of its major units. WH Group, formerly known as Shuanghui, tried to make a $5 billion Hong Kong listing this spring, but had to yank the offer due to weak demand. It ultimately made a smaller offering worth nearly $2 billion in August, and the stock now trades about 16 percent below its offer price. Any offerings by Bright could get a similarly lukewarm reception, reflecting investor skepticism about Chinese ownership for these foreign brands and also the limited longer term growth potential in their core western markets.
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