Doug Young

Corporate China | Bright offers China food for Hong Kong investors

Bright Food's overseas IPO plans for its British Weetabix and Australian Manassen brands could get lukewarm response due to investor skepticism about their growth prospects.

Reading Time:3 minutes

Why you can trust SCMP

Doug Young

Published: 3:03pm, 9 Nov 2014Updated: 3:04pm, 9 Nov 2014

I've watched with interest over the last two years as Shanghai-based Bright Food has quietly gobbled up a stream of high-profile global investments, positioning the company to potentially become one of China's first international consumer brands to rival giants like Procter & Gamble (NYSE: PG) and Kraft Foods (Nasdaq: KRFT). Now we're getting further details of Bright's growing global aspirations, with word that it's planning a series of international IPOs including potential major listings in Hong Kong and London.

The source for these latest reports is one of the company's vice presidents, who was detailing Bright's longer-term financial roadmap at a press conference in China. As a resident of Bright's hometown of Shanghai, I have to quickly give my view that Bright seems like a relatively well-run company but also one that's prone to city politics. But that's probably true of any major Chinese firms, and in this case the Shanghai government is clearly supporting Bright in its recent multibillion-dollar global acquisition spree.

According to the latest headlines, Bright would seek individual IPOs for one or more of its recent major acquisitions in their home markets. Two potential deals include a London IPO for Bright's Weetabix breakfast cereal unit, and an Australia-based IPO for its Manassen Foods, both of which could come by 2016. Bright bought 60 per cent of the UK's Weetabix in 2012 for about $1.1 billion (HK$85 billion), and bought 75 per cent of Australia's Manassen a year earlier for nearly $400 million.

Bright Vice President Gu Junjie said the company would maintain control of any units that make separate IPOs, but declined to give any specific fund-raising targets. Such offerings look smart from both a financial and public relations perspective. Financially they would help Bright recoup some of the billions of dollars it is spending on its global expansion. From a PR perspective, re-listing the firms in their home markets would allow regional investors to buy into these well-known local brands. Bright could follow these local IPOs with another local listing for leading Israeli dairy firm Tnuva if and when it closes its deal announced in May to buy 56 per cent of the company for $1.4 billion.

In addition, Bright would also consider listing Weetabix, Manassen or some of its other global assets in Hong Kong, Gu said. I could also see Bright also listing the entire company in Hong Kong as part of a dual listing in Hong Kong and Shanghai. That would help to raise its profile, which is important for a consumer company, and also give it access to global capital markets to fund its international expansion.

The roadmap outlined by Gu puts Bright in a similar category with local dairy Mengniu (2319.HK) and meat processor WH Group (0288.HK), two other major Chinese food firms that are developing their own globalization strategies. Mengniu is building an increasingly cozy relationship with French food giant Danone (Paris: DANO) through a series of big tie-ups over the last year, while WH Group last year made headlines with its purchase of US pork giant Smithfield and a subsequent IPO in Hong Kong.