NEW YORK — AgFeed Industries Inc., one of the largest independent hog production and animal nutrient companies in China, has proposed selling a maximum of 20% of its animal nutrients feed subsidiary via a listing and initial public offering (I.P.O.) of the subsidiary's common stock.
The I.P.O. is anticipated to raise $20-25 million and will be effected through the filing of a registration statement with the Securities and Exchange Commission (S.E.C.) that the S.E.C. must declare effective before any common stock sales may occur.
"The I.P.O. reflects our board's desire to provide dedicated capital to our animal-nutrient business to develop its presence in other segments of the animal-nutrition market, specifically, the compound feed and concentrated feed markets, which together comprise 95% of China's expanding production,” said Dr. Songyan Li, AgFeed's chairman. “For a number of years, our focus has been on additive pre-mix that represents 5% of the market. The offering will enhance the ability of our animal nutrition business to pursue strategic initiatives and growth, upgrade personnel, foster innovation and raise capital while relying on the wisdom and practical experience of the parent company."
Hog feed comprises 35%, or $20 billion of the $58 billion animal feed market in China, said Junhong Xiong, AgFeed's president. “Most producers have an annual production capacity of approximately 10,000 tons,” he added. “Our animal nutrition unit sold more than 95,000 tons of feed in 2009 and we feel that the I.P.O. is a great opportunity to position our animal nutrition business to pursue opportunities for organic growth and growth through acquisitions."
AgFeed Industries is a U.S. company with its primary operations in China. The company has two profitable business lines — pre-mix and blended animal feed and hog production. AgFeed is one of China's largest commercial hog producers in terms of total annual hog production, as well as one of the largest premix feed companies in terms of revenues.
China, the world's largest hog producing country, produces more than 600 million hogs per year, compared to approximately 100 million hogs in the U.S. China also has the world's largest consumer base for pork consumption. More than 62% of total meat consumed in China is pork. Hog production in China enjoys income tax-free status. The pre-mix feed market, in which AgFeed presently operates, is an approximately $3 billion segment of China's $58 billion per year animal-feed market.