Middle Eastern fund Investcorp is joining forces with Chinese partners to spend up to $500 million buying food brands and manufacturing sites in Asia, aiming to tap into China’s emerging middle classes and their growing taste for foreign foods.
In a deal announced on Thursday, Investcorp has teamed up with state-owned China Resources and Fung Investments, backed by Hong Kong family Victor and William Fung, to launch what the company says will be Asia’s only private equity fund dedicated to investing in food.
Investcorp has $28.2 billion worth of assets under management, including Britain’s Tyrells crisps and Australia’s Yarra Valley snackfoods in its portfolio, and has identified China as an emerging market for Western-style foods.
Soy sauce produced in Japan is also likely to be a target for the partnership to buy and export to China.
Investcorp co-chief executive Hazem Ben-Gacem played down China’s slowing economic growth which, at 6% in the third quarter of 2019, was the weakest for 27-1/2 years.
“We are investing in a defensive sector that will continue its momentum regardless of the macroeconomic trends. People might spend less on luxury brands or travel, but not on food consumption in a downturn,” Ben-Gacem told Reuters.
The transaction was finalised in Hong Kong late Wednesday, with the three parties signing an initial funding agreement of $300 million.
The partnership expects its first deal to be closed within the next four months and aims to have 12 investments made over the five year life of the fund.
Equity investments are expected to be between $40 and $70 million each into businesses with enterprise values (equity plus debt) of up to $100 million.
Bahrain-based Investcorp has an existing partnership with China Everbright, which has centred on technology investments during its one-year partnership.