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Muyuan to hog USD 724mn
Posted on Tuesday, 04 December 2018 10:54
Muyuan Foodstuff is diluting its equity to raise up to CNY 5.00 billion (USD 724.19 million) to support long-term and sustainable business development.
The plan currently comprises the sale of 417.05 million new shares to no more than ten investors via a private placement that would represent a 16.7 per cent stake in the post-issue capital.
China is promoting the transformation of animal husbandry from traditional farming methods into a large-scale, ecologically and environmentally-friendly, efficient and safe industry.
Scaled-up enterprises are better equipped to deal with the large amount of waste water and waste generated from pig breeding and to control the risk of disease so higher quality meat makes it to the market.
China is the largest producer and consumer of pork globally, with 53.40 million tons in 2017, which is expected to reach 57.60 million tons by 2020, according to government statistics cited in the prospectus.
Last year Muyuan’s output accounted for a market share of 1.0 per cent of the country’s live pig market, which represents significant growth opportunities, especially as the cash call will fund capacity expansion.
The group’s equity dilution not only meets the government’s policy but also increases production to support a staple supply chain while reducing an asset-liability ratio that has risen in recent years due to rapid growth.
As of 31st September 2018, the group’s consolidated asset-liability ratio stood at 55.6 per cent, up from 47.0 per cent as of 31st December 2017 (31st December 2016: 56.2 per cent; 31st December 2015: 50.2 per cent).
This ratio is higher than the average when compared to listed companies operating in the same industry but the cash call ought to help repay debt to improve the business’ financial structure and net profits.
Muyuan’s latest fundraiser will be the largest capital increase ever by a hog and pig farmer, according to Zephyr, the M&A database published by Bureau van Dijk.
In fact, Zephyr shows the company’s previous cash calls - completed in April 2017 and January 2018 - account for the sector’s top two by value.
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