Cargill to sell China poultry unit to private equity firm DCP Capital

• 01 Jun, 2023
• China

BEIJING, May 31 (Reuters) - U.S. agribusiness giant Cargill said it is selling its poultry business in China to private equity firm DCP Capital, exiting a Chinese meat market that has become increasingly challenging, especially for foreign players.

The sale of the unit known as Cargill Protein China is subject to regulatory approvals but is expected to close this year, Cargill said in a statement on Wednesday.

It did not give a transaction price and DCP declined to comment on the deal.

China is the world's No.2 poultry producer after the United States, producing about 19 million tonnes of chicken meat last year.

Privately-owned Cargill, one of the top poultry producers in the U.S., started its China poultry business in 2011, breeding, raising and processing chickens in Chuzhou in eastern Anhui province.

In 2019 it added a $48.8 million plant to the operations, which can process 65 million birds annually.

Livestock farm margins in China have however been squeezed in the last two years as the Ukraine war drove up feed prices and weak demand during the COVID-19 pandemic depressed meat prices, Juhui Huang, an agribusiness consultant at Beijing Means Consulting Co, said.

"Local companies in China are generally better in managing their costs and more flexible in sales strategies like payment terms, which makes them more competitive in such a difficult environment," he said.

Despite the pressures, China's largest poultry players have continued to expand, far outpacing smaller operations such as Cargill's.

Wellhope Foods, one of the largest domestic firms, slaughtered 700 million chickens last year and has a goal of 1.5 billion birds by 2029.

The company also introduced plant protein products in 2020 produced in the Anhui facilities.

China's DCP Capital has invested in several other food and agriculture businesses including another of China's top poultry producers, Fujian Sunner Development (002299.SZ), its website says.

The private equity firm is focused on Greater China and led by former members of the KKR and Morgan Stanley private equity businesses, according to the website.

Reporting by Dominique Patton; Editing by Christian Schmollinger and Barbara Lewis

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