Itochu Corp. (8001), Japan’s third-largest trading house, is nearing an agreement to invest in Thai billionaire Dhanin Chearavanont’s CP Pokphand Co. (43), according to people with knowledge of the matter.
A deal could be announced as soon as today, said one of the people, who asked not to be to be identified as the information is private. Hong Kong-listed CP Pokphand, which has a market value of $3 billion, produces animal feed in China and owns farms in Vietnam.
Shares of CP Pokphand and its Bangkok-listed parent company, Charoen Pokphand Foods Pcl (CPF), were halted from trading today pending announcements. The board of Charoen Pokphand Foods, Thailand’s largest meat producer, met yesterday and approved a “significant” asset disposal by the company and one of its subsidiaries, it said in an exchange filing today.
Investing in CP Pokphand would help Itochu, the largest shareholder in Paul Smith Group Holdings Ltd., expand its food business in Asia as rising incomes boost consumer spending. In 2013, Itochu bought Dole Food Co.’s Asian fruit and vegetable business and global canned foods unit for $1.3 billion after partnering with the U.S. producer in Japan for 50 years.
CP Pokphand shares have risen 25 percent in Hong Kong trading since the start of the year, outpacing the 3.3 percent gain in the benchmark Hang Seng Index. The company said May 14 its first-quarter profit jumped 38 percent to $41.4 million. Revenue for the period rose 5.5 percent to $1.25 billion.
A Bangkok-based spokeswoman for Charoen Pokphand Foods declined to comment, while a spokesman for Itochu said he couldn’t immediately comment.
Charoen Pokphand Foods Chief Executive Officer Adirek Sripratak is abroad and not available for comment, according his assistant who picked up a phone call to his office. A person who answered the phone at CP Pokphand’s Hong Kong office said nobody at the company was immediately available to comment.
For Itochu, led by Chief Executive Officer Masahiro Okafuji, the deal will add to a food empire that already boasts stakes in convenience store operator FamilyMart Co. (8028), cooling oil maker Fuji Oil Co., wholesaler Nippon Access Inc., and joint investments with China and Taiwan processed food manufacturer Ting Hsin Group.
Food accounted for 50.8 billion yen, or 22 percent of Itochu’s net income in the year ended March 31, data compiled by Bloomberg show. Three years earlier, the company got 13 percent of earnings from food.
Dhanin has a net worth of $2.4 billion, according to the Bloomberg Billionaires Index. When Chinese leader Deng Xiaoping opened the country’s economy in 1979, his family’s Charoen Pokphand Group was its first foreign investor, registering its business there as No. 001.
The connection was cemented almost two years ago when the group invested $9.4 billion to become the largest investor in Hong Kong-listed Ping An Insurance Group Co. (2318), China’s second-biggest insurer.
Dhanin and his brothers turned the family business into Thailand’s largest agricultural group, making animal feed and operating farms that produce piglets, broiler chicks, table ducklings, shrimp and fish. They moved into retailing, telecommunications and real estate, and expanded to Indonesia, India, Vietnam and Turkey.
The family is the biggest shareholder of CP All Pcl (CPALL), which runs more than 7,700 7-Eleven stores in Thailand, and True Corp., the nation’s third-biggest mobile phone operator.
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