Private equity firm CVC Capital Partners is reportedly in the process of offloading Chinese fast food restaurant chain Da Niang Dumplings, two years after it acquired it, according to articles in Chinese media.
The private equity firm has reportedly already kicked off the process and initiated talks with several investment banks and Chinese restaurant chains as it plans its exit.
However, CVC has denied the information saying it had no intention to sell.
Wu Guoqiang, founder of the Jiangsu province-based dumpling chain, has accused the firm of poor management resulting in declining revenues, in an open letter to the public in February. He claimed that revenues dropped 10 per cent each year in 2014 and 2015.
Wu sold a controlling stake of Da Niang to CVC but remained a minority shareholder with a 10 per cent stake.
Trouble brewed almost immediately after the dumpling chain was bought over by CVC in 2014. Wu says, the firm’s cost-cutting measures resulted in the reduction of each dumpling’s net weight and the removal of certain key ingredients.
Despite Na Niang operating 480 restaurants nationwide under an economy restaurant brand, menu prices were raised resulting in loss of customers. Wu also reportedly claimed he was deliberately refused entry from new management to a company annual meeting.
When news of the acquisition first broke in 2014, CVC maintained that it was committed to helping improve and expand Da Niang Dumpling’s operations and would seek an IPO of the company in Hong Kong at an appropriate time.
This isn’t the first deal for CVC that has turned sour.
In April 2014, the firm took a 82.7 per cent stake in high-end Chinese restaurant chain South Beauty for a reported $300 million. Its founder Zhang Lan and two others were quickly forced out by court orders amid falling business performance and their assets were frozen.
In May, it was announced that CVC would veer from the restaurant business and delve straight into the world of gambling through a strategic acquisition of Italian gambling operator and payment solutions Sial Group S.p.A. for 1 billion pounds.