Carlyle Takes Share Of CP Feed Interest In China

Thailand's largest agribusiness conglomerate, Charoen Pokphand Group (CP Group), and global alternative asset manager, The Carlyle Group (Carlyle), have announced that Carlyle Asia Partners III L.P., a US$2.55 billion pan-Asian investment fund, will acquire from CP Group US$175 million of convertible preference shares and options in C.P. Pokphand Co. Ltd. (CPP), one of China's largest livestock and aqua feed producers. CP Group is the single largest shareholder of CPP. The investment is subject to certain conditions and is expected to close by 22 July 2010.

Carlyle Asia Partners III L.P. has agreed to purchase approximately 2.271 billion convertible preference shares, and is entitled to additional convertible preference shares in certain circumstances, for an aggregate price of US$175 million and CP Group will grant approximately 324 million options each carrying the right to acquire one convertible preference share in CPP at HK$0.6 per share to Carlyle. Following the acquisition, Carlyle will own approximately 11.3 per cent of CPP on a fully diluted basis, assuming Carlyle does not receive further shares or exercise its options.

CP Group plans to use part of the proceeds from this transaction to prepay before the end of 2010 approximately US$150 million of the intercompany debt of approximately US$288 million which is outstanding to CPP.

Dhanin Chearavanont, Chairman of CP Group and CPP, said: "China's feed industry is going through a dynamic period of growth driven by people's demand for higher quality food and more stringent safety standards. We believe that CPP is uniquely positioned in the industry to serve consumers' need and to capture business opportunities arising from this demand. We welcome Carlyle as a fellow shareholder of CPP. Carlyle's unique experience in the management of food industry value chain will also support CPP to produce superior products and to become the leading supplier to China's livestock farming industry."

Patrick Siewert, Senior Director of Carlyle, commented: "We are proud to partner with Chairman Chearavanont and CP Group to continue to build on the success of CPP. Carlyle sees great growth potential in China’s agriculture sector and believes the rapidly expanding middle class, increasing demand for quality food supply, as well as heightened awareness of food safety and dietary issues, will underpin future growth in the sector. We believe that China's feed industry, driven by the change in demographics and government policies, is at a point where the industry will be more stable, and in turn, will favor the responsible, experienced and leading producers such as CPP. We look forward to contributing our expertise and experience to CPP through our participation on the board."

Stable and growing meat consumption is driving demand for livestock feed, and China's per-capita animal protein consumption is still below most developed countries. It is expected that as meat consumption in China grows along with its rate of disposal income, the demand for animal and aqua feed products will also increase. The feed industry is also undergoing consolidation as the Chinese government strives to improve food safety standards through tougher licensing standards and monitoring systems, and as a result increases control over the whole food chain, which starts at the feed level.