Goldman to sell stake in landmark China buyout deal

Goldman to sell stake in landmark China buyout deal

Hong Kong: 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. 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 has a listed arm, Henan Shuanghui Investment & Development Co Ltd.

Goldman’s sale of the stake will bring its holding in the parent to roughly 5% down from around 10%.

Shineway, Goldman Sachs and CDH declined to comment. The sources declined to be identified because the sale process is private and confidential.

In late 2006, a consortium-led by Goldman’s ASSG and CDH bought control of Shineway Group for $256 million. 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.

Financial details of the acquisition and shareholding structure of the consortium were not fully disclosed at the time of the deal, but the sources said Goldman paid about $75 million for a stake in Shineway, well known for its sausage products.

Including leverage used for the transaction, Goldman will earn around five times its investment through the sale of its Shineway stake, according to a source with direct knowledge of the deal.