On December 15, 2008, Madame. Zhang Lan, Chairwoman of South Beauty Group, officially announced the Group had sold a tiny part of the equity in the package assets under its wings to such famous private equity investment institutions as CDH Investments to raise a total of RMB 300 million under the approval of the competent government institution, and had received the money.
Famous for its concept of “Global Quality, Chinese Style”, South Beauty Group, an international restaurants management group, is the enterprise with the strongest influence and the leading position in China’s food & beverage sector in China at present, and runs nearly 40 own-restaurants in such first-tier cities as Beijing, Shanghai and Tianjin. Lan Club, a premium brand under the umbrella of the Group, has won the extensive compliment from the elites and high ranking people from both home and abroad. In 2008, South Beauty Group has been the food provider for the Beijing 2008 Olympic Games. As South Beauty has been hotly pursued by many domestic and overseas investment institutions in recent years, its private equity has been closely watched by the outsiders. The current private equity as a great success marks South Beauty has entered a new development stage, and the injection of the capital power into South Beauty’s resource system will enable a faster brand enhancement, said Madame Zhang Lan, learning the lesson from some private enterprises, South Beauty has always adhered to the principle of ensuring the autonomy and control right of the enterprise at any time, and should be a Chinese enterprise with international competitiveness when attacking the international market in the near future.
South Beauty started the contact with investment institutions one year ago. When asked why to introduce the external investors, Madame Zhang Lan said, “I am always a person eager to do well in everything. South Beauty, as it is now, has been the fruit of the accumulation and development based on our own strengths. We have launched the private equity not because of the cash flow.”“We started contacting some funds last year, just wanting to use some means that have proved effective though we were not familiar with to propel the development of the group. I, therefore, have contacted various types of investment institutions, an extremely good opportunity to learn something,” added Madame Zhang. “Our dream is to build a national brand that makes our compatriots feel proud, and become an international brand accepted by the western mainstream society. To realize such an objective, we will still have a long way to go only with the strengths of the current management team. We, therefore, have chosen to team up with those people sharing our dream and having the ability to realize the dream to struggle hand in hand. This is the reason behind our search of investors.”
When speaking of the cooperation with CDH Investments, Madame Zhang Lan noted it was a luck now that both parties can cooperate. “After contacting and communicating with the CDH Investments’ core management members like Wu Shangzhi, Jiao Zheng and Wang Gongquan, I felt that CDH Investments was committed to building a Chinese national brand in the PE investing domain, just like South Beauty is pursuing. This makes me respect them very much. In the meanwhile, CDH Investments has the experience in investing in some private enterprises such as Mengniu, Lining and Belle, and helping them keep growing. In fact, CDH Investments’ offer was not the highest among all the interested investment institutions. However, we have finally selected CDH Investments, just because we think a private equity should be more of raising money, intelligence and advantages. Value is a condition precedent, you are not OK if you can not give the good price . But only a high offer is not OK either. What we need more is the commercial savvy and might behind the high price!” remarked Madame Zhang. The capital market is very downturn at present, while the private equity sector is also hit. In such a situation, South Beauty has successfully raised the PE at the price almost the same as that in the public placement market without any additional conditions, which can indeed be recorded as an influential event in China’s capital market. These both represents an acknowledgement of the brand value of South Beauty and an example for the investment value discovery in the context of the consumption upgrade, and highlights the constant concept of CDH as an investment industry leader. Compared to the practice of many investment institutions at present, CDH has already exhibited the trend to be something in the investment sector.
As to the price of the current private equity, Madame Zhang Lan said, “I have been engaged in the food & beverage industry for almost two decades. South Beauty has arrived at the stage of striding forward. The price in the mouth of the investors, however high it is, will become the floor price in several years, because this industry is so potential, and South Beauty is so potential for future. Investors are always more sagacious than industrialist, otherwise they will not make an investment. The investors of South Beauty must feel satisfied with their choice!”Li Maochang, a famous lawyer from Junhe Law Offices acting as the legal consultant for South Beauty on the private equity and being responsible for designing the legal framework, expressed his unique viewpoint on South Beauty’s private equity: South Beauty has attracted CDH as the investor, a result enabling multiple wins which will help the Chinese food & beverage industry to quickly cultivate a national brand that can compete against international brands and drive the development of the entire industry. Mr. Luo Yun, responsible for the concrete work of the private equity of South Beauty, said that the constant adherence of Mrs. Hu Xiaoling, Managing Director, and Mr. Wu Hua, of CDH Investments, and their multifaceted efforts to help South Beauty to solve the practical problems prior to the investment have won the acknowledgement of Chairwoman Zhang Lan and the operating team of South Beauty, which also is an important reason that has made the private equity a success.
The food & beverage industry has been impacted by the economic crisis during which liquidity is deficient and cash prevails. However, what South Beauty feels more is the arrival of opportunities - less rivals, lower rents, and reduction of some costs – all these are beneficial to South Beauty. On the other hand, many enterprises can take in many elites in the context of the general job cut. South Beauty is currently designing the equity incentive structure. In the meanwhile, South Beauty has recently started contacting McKinsey, IBM and other famous institutions in the hope of formulating the development strategy for the new era and implementing the ERP management system.
To realize the dream of spreading the five-thousand-year Chinese cuisine culture to every corner of this planet and shake up the “French Major Dish, Chinese Minor Dish”, South Beauty will launch a second-round private equity to the international famous top-ranking investment institutions at an appropriate time in order to prepare the corresponding resources for the overseas expansion and support South Beauty to offer premium Chinese dish and cuisine services in the major metropolises in the world, and finally realize the target of growing into an international-class food & beverage brand.
