Investcorp eyes food sector with US$500m fund

Singapore

THE Singapore office of Middle Eastern asset manager Investcorp has teamed up with partners in China and Hong Kong for a new US$500 million fund to buy food brands and manufacturing sites in Asia.

The Bahrain-headquartered firm, together with Chinese state-owned conglomerate China Resources and Fung Investments, the private investment arm of the families of Hong Kong's Victor and William Fung, announced the fund's launch on Thursday, calling it the first private equity platform dedicated solely to investing in Asian food brands.

The new fund will be jointly owned and managed by Investcorp, China Resources and Fung Strategic Holdings - a member of Fung Investments - operating out of their offices in Singapore, Beijing and Hong Kong respectively.

The three founding partners have committed US$300 million in capital, but plan to raise US$200 million more, they said on Thursday.

The fund will focus primarily on capturing the growth and market opportunities of China's highly fragmented food sector, although Singapore and the rest of South-east Asia are also on the radar.

The partners will build a diversified portfolio to support fast-growing businesses with anticipated higher margins and defensive franchises, as well as new premium brands in niche sectors such as condiments, packaged food and healthy snacks.

The first deal is expected to be closed within the next four months, a spokesman told The Business Times (BT). The partnership is aiming to make 12 investments over the five-year life of the fund.

Each equity investment will range within US$40-70 million, to be made into businesses with enterprise values (equity plus debt) of up to US$100 million, BT understands.

Investcorp co-chief executive officer Hazem Ben-Gacem said the partnership will be investing in what it considers the world's largest and fastest-growing consumer market and in one of the most defensive sectors.

In particular, the food sector will be supported by China's growing middle class as well as the trend of Chinese millennials spending more money and seeking premium and healthier brands, the partners said.

Mr Ben-Gacem also downplayed China's slowing economic growth, telling Reuters: "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."

Investcorp has been actively growing its presence in Asia. Its Singapore office opened in 2017, serving as the base for its expansion in Asia and a platform from which Investcorp analyses investment trends in the region. Investcorp had US$28.2 billion in assets under management as at June 30. Its investments include British potato chips maker Tyrrells, Turkish red meat producer Namet, and US convenience store chain Circle K.

As for Fung Investments, the Fungs are controlling shareholders of Hong Kong-based global supply chain giant Fung Group.

China Resources is one of the largest owners and distributors of food brands in Greater China. Its wholly owned subsidiary China Resources Capital Management manages US$12 billion in assets.