China’s second largest food producer is on the verge of its fifth major overseas acquisition as it tries to diversify away from China’s fast-rising production costs.
The latest acquisition target of Shanghai-based Bright Food Group is Tunva, Israel’s top food processor. If talks come to fruition, Bright Food will buy a controlling stake in Tunva at an implied valuation for the firm of about $1.63 billion. Its negotiating partner is the British private-equity fund Apax Partners which owns 56% of Tunva.
The deal comes on the heels of Bright’s four other overseas acquisitions: a New Zealand dairy producer, an Australian food producer, the French winemaker Diva, and biggest of all, a 60% stake in Britain’s cereal-maker Weetabix at an implied valuation of $1.9 billion.
“The previous acquisition of four overseas companies represents the beginning of our internationalization strategy under which we will take over overseas firms mainly in the fields of resources and the internet,” said a Bright spokesman. Pan said Bright will reduce the financial risk of its aggressive strategy by securitizing its acquisitions.
“In view of the advanced agriculture of Israel and the nation’s plentiful resources, we may even take over other Israeli firms should the conditions prove right,” the spokesperson added.
Bright hopes to use acquisitions to help expand its overseas sales from 15% to 25% by 2015, according to a former Bright executive. The overseas sales will help offset the rising cost of production in China which has been eroding the firm’s profit margin, according to Wang Qi, president of Shanghai-based brand-consulting Icon Group. The acquisitions are expected to help Bright establish an overseas marketing network by expanding its product line.
The Tunva acquisition is also expected to enhance Bright’s R&D and management capabilities, both of which will be essential to the success of its internationalization strategy.
