Zhongpin receives buyout proposal

Chinese meat and food processor Zhongpin has received a preliminary, non-binding proposal from its chairman and CEO Xianfu Zhu, who intends to buy out shareholders and take the company private.

Xianfu Zhu is the company’s largest shareholder and currently owns 17.5% of the stock. He plans to buy all the outstanding shares at $13.50 each in cash, which represents a premium of 47% to the closing price of Zhongpin shares on Monday.

Based on the number of outstanding shares in the company, the transaction is worth nearly $419m.

Xianfu Zhu said the proposal will provide a very attractive alternative to the company’s public stockholders.

"I do not propose to make any commitment prior to reaching transaction terms approved by the board of directors of the company," Zhu added.

Zhu plans to arrange the financing for the deal by commencing discussions with potential sources of both debt and equity.

The sources may include existing shareholders such as TPG-Axon Capital Management, Caledonia Investments, and Putnam Investment Management.

Meanwhile, the company said that it will form a special committee to evaluate the proposal and added that the offer was ‘non-binding’ and there was no assurance that a deal will be sealed.

Zhongpin, headquartered in Changge City, China, sells and processes pork products, vegetables, and fruits in China, and also exports its products to Europe, Hong Kong, and some Asian countries.

For the fourth quarter, Zhongpin revenues soared by 42%, however, its operating profit was down by 23%.

The company has been investing to increase its production capacity: Last year, it began trial production at two new chilled and frozen pork products plants in the Jiangsu and Jilin provinces.

The plants are being built with an investment of $63m and $61.5m respectively and phase I of the construction has already been completed, while phase II is expected to be completed in the third quarter of 2012.