BANGKOK -- Top Thai conglomerate Charoen Pokphand Group will build a pork business in China that spans breeding to food processing in an attempt to combat a swine shortage caused by flooding and disease.
Chia Tai Investment, an indirect subsidiary of CP Group's food processing arm Charoen Pokphand Foods, will buy 43 businesses encompassing breeding, farming, slaughtering and food processing in a deal valued around 28 billion yuan ($4.1 billion).
Pork dishes are a fixture on Chinese dining tables. China was the world's largest swine market in 2019, at roughly $200 billion. But an epidemic of African swine fever and heavy flooding in Asia's largest economy have caused a supply shortage.
The seller, Chia Tai Animal Husbandry Investment, is an indirect wholly owned subsidiary of CP Group. Charoen Pokphand Foods, listed on the Stock Exchange of Thailand, will convene an extraordinary general shareholders meeting Oct. 27 to obtain approval.
CP Foods intends for the reorganization to bolster Chia Tai Investment's operations through access to China's pork market. The 43 transferred businesses have facilities in 22 Chinese provinces with a combined farming capacity of 7.2 million hogs yearly.
Chia Tai Investment already owns feed milling operations. Integrating it with these 43 businesses would let the group "better address market changes, leverage the know-how across the value chain and further expand its footprint in the future," CP Foods said.
The purchase will be done through allocation of new shares. Chia Tai Animal Husbandry Investment will receive Chia Tai Investment's new shares representing 65% of its enlarged share capital.
The transaction will dilute shares in Chia Tai Investment held by another indirect subsidiary of CP Foods from 99.9% to 35%.
Charoen Pokphand Foods insisted that the reorganization will build on and strengthen Chia Thai Investment's operations, and that it will still benefit from the economic upside through a 35% stake.
Chia Tai Investment faces the same vulnerability as its peers to the difficult pork market, but the group is banking on management know-how through its experience of livestock farming.