CJ Cheiljedang [KRX: 097950], a South Korean food and nutritional products company, has mandated PwC for the sale of its majority stake in Chinese pickled food maker Sichuan Jixiangju Food, according to three sources familiar with the matter.
CJ Cheiljedang’s filing shows it owns a 60% stake in the Chinese subsidiary, while the first source noted that Sichuan Jixiangju’s President Wenjun Ding owns 31.24%. The parent company, with a market cap of KRW 5.2trn (USD 4bn), is looking to sell its stake as an effort to adjust the foreign business portfolio, a second source said. The stake sale begun a few months ago and the seller has been in talks with several bidders, he added.
A spokesperson for CJ Cheiljedang declined to comment on this matter.
For its 2023 strategy, the company is seeking to expand the frozen food business portfolios and sales channels of dumplings in China while accelerating the growth of the Korean sauce products and online operations, the CJ spokesperson said citing its IR presentation released yesterday (Monday). It will focus on building its brand ‘Bibigo’ overseas and expansion into new markets such as Canada, Australia, Indonesia, and Malaysia, he added.
The Meishan, Sichuan-based company generated more than CNY 1.5bn (USD 219m) in sales revenue last year, the first source said. Its listed rival Chongqing Fuling Zhacai Group [SHE : 002507] currently trades at 26.12X price to earnings.
The business has attracted mostly industry players and private equity firms with portfolios in the sector, due to its strong regional presence and sales uptick during COVID lockdowns, the first source said. However, financial investors would find it difficult to identify an exit route given the uncertain IPO prospect, the source added.
The stake sale came after Sichuan Jixiangju’s failed domestic listing attempts during COVID lockdowns, according to the first source. It filed application to list on GEM in October 2020, advised by Huaxing Securities, and later in 2021 it changed advisor to Minsheng Securities for the proposed listing, according to the China Securities Regulatory Commission’s website. Earlier this year, Chinese regulator reiterated its restriction on “red light” industries, including food and beverage companies, seeking IPO listings in Shanghai and Shenzhen in order to channel capitals to more strategic sectors.
Established in 2000, Sichuan Jixiangju received a strategic investment from CJ Cheiljedang in 2011. The initial investment, in exchange for a 49% stake, was reported to be CNY 144.55m (USD 22.5m).
The company produces, processes, and sells pickles, beef paste and other condiments products. It also exports to overseas markets such as the US, the UK, Australia, as per its website.
PwC declined to comment. Sichuan Jixiangju did not respond to requests for comment.
CJ Cheiljedang operates three business units – food, bio, and live stocks. It announced yesterday that its sales revenues in 2022 totaled at KRW 18trn, 19.3% up year on year thanks to growth of its K-food and bio business in global markets. Its food business recorded sales exceeding KRW 10trn for the first time, with operating profits of KRW 600bn, due to increased sales in overseas markets across the US, Europe, and Asia.