Baby formula maker China Feihe files for HK IPO again, said to seek $1b

The flag of Hong Kong Exchanges & Clearing Ltd. (HKEx), top center, the Chinese national flag, bottom center, and the Hong Kong SAR flag, bottom right, fly in the Central district of Hong Kong, China, on Wednesday, March 2, 2016. Photographer: Justin Chin/Bloomberg

China Feihe Ltd, an infant formula producer backed by Morgan Stanley Private Equity Asia (MSPEA), has filed for an IPO in Hong Kong, two years after it shelved its first listing application.

The company’s filing is heavily redacted, so it is unclear how many shares China Feihe intends to offer and how much it seeks to raise in the IPO. A Bloomberg report in March, however, said the company was gearing up for a listing that could raise as much as $1 billion.

Feihe did not specify how it will utilise the proceeds from the listing.

It will be Feihe’s second attempt to conduct an IPO in Hong Kong. It first applied for a Hong Kong listing in May 2017 but the IPO was put on hold as the company adjusted its corporate structure after acquiring Vitamin World, the third-largest nutritional supplements retailer in the US, for $28 million in January 2018.

The Beijing-headquartered company went private after delisting from the New York Stock Exchange in 2013, joining a wave of exits by US-traded Chinese firms.

Feihe is the largest and most highly recognised Chinese brand infant milk formula company, according to a study conducted by Frost & Sullivan. In 2018, the company accounted for 7.3 per cent market share in China in terms of retail sales and value.

The filing showed that the company’s revenue has expanded threefold since its last IPO attempt, driven by fast growth in its core infant formula business. Feihe booked 10.4 billion yuan ($1.5 billion) in revenue in 2018, a 76.5 per cent rise from a year earlier. Net profit rose 93 per cent to 2.2 billion yuan ($320 million).

Feihe’s higher-end products achieved a gross profit rate of 7.6 per cent. These products contributed around 75 per cent of growth in sales of the company’s baby formula products last year, according to its preliminary prospectus.

“We are committed to sustaining our market leadership with the highest quality and innovative portfolio of products that cater to the development needs of Chinese babies,” the company said.

Feihe’s IPO is likely to gauge Chinese consumers’ faith in domestic milk production following a major safety scandal in the sector a decade ago. The 2008 melamine scandal was a widespread food safety incident in China that led many Chinese consumers to prefer imported formula.

Early this year, the Chinese government called on domestic suppliers to grow their market share.

“Our vision is to further solidify our market leadership as the most trusted and reputable infant milk formula and nutrition brand, while continuing to expand our product offering,” the company said.