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South Beauty gets suitor from Beijing

By Wang Xu (China Daily)
Updated: 2008-12-16 08:13

South Beauty Group, a homegrown restaurant chain, has secured a 300 million yuan investment from venture investors, despite the current economic downturn.

CDH Investments, a Beijing-based private capital firm, will invest 200 million yuan, South Beauty said in a statement. China International Capital Corporation (CICC), an investment bank in which Morgan Stanley holds a 34 percent stake, will invest 100 million yuan. The two investors combined will hold less than 10 percent of the restaurant chain.

The valuation of the deal is close to an initial public offering, which prices the company more than 10 times its 2007 earnings, said Rong Xuejing, the company's spokeswoman.

The company plans to add about 20 outlets in 2009, including one in London, said Rong. It will use the funds to finance its expansion plans and attract more talent.

A booth of restaurant chain South Beauty Group at the Ninth Beijing CBD International Business Festival. [China Daily]

Established in 2000, South Beauty features Sichuan-styled dishes targeting high-income business consumers. It has 40 outlets in Beijing, Shanghai and Tianjin. The company's sales revenue has crossed 1 billion yuan in 2007, according to earlier reports.

Zhang Lan, South Beauty's founder and board chairman, is ranked 311th in Forbes Magazine's China Richest List 2007, with total assets of 1.79 billion yuan.

The nation's catering sector has been a hotspot for investors over the past few years. Ajisen China, a fast-food noodle restaurant chain, held a $210 million share sale in Hong Kong last March. Little Sheep Group, a homegrown hotpot restaurant chain, also raised $105.7 million in a Hong Kong flotation this June, bringing substantial returns to its investors including Europe's largest private equity firm 3i Group.

According to the Ministry of Commerce, sales revenue of the accommodation and catering sector amounted to 1.11 trillion yuan in the first three quarters, up 24.8 percent year-on-year. The number is expected to exceed 1.54 trillion yuan for 2008, up 24.2 percent from 2007.

However, the nation's venture capital market has been sluggish over the past months, as the economic slowdown has dented investor confidence as well as the profitability of startup companies.

Moreover, the slumping global stock markets have made it difficult for investors to cash out from their portfolio companies.

In the third quarter, a total of 109 enterprises received venture funding of $788 millionin China, down 34.6 percent from the same period a year ago, according to Beijing-based market research house Zero2IPO.

The amount of money raised by Chinese companies in the first 11 months of the year through IPOs fell to $21.8 billion, down 70 percent year-on-year.

Over the past few months, initial public offerings also came to a halt in stock exchanges around the world. Around 300 companies are believed to be awaiting government approvals for listings on the domestic bourses.