Shanghai Jahwa Group(600315.SH), a state-owned cosmetics and household goods maker, plans to raise 5.1 billion yuan ($797 million) by selling assets to fund expansion into luxury products and the acquisition of foreign brands.
The group plans to sell some assets, including a 29 percent stake in its Shanghai-listed unit Shanghai Jahwa United Co., to a Chinese investor, Ge Wenyao, general manager at the parent and the unit’s chairman, said in an interview in Shanghai yesterday.
Consumer spending continues to grow in China on rising incomes and the nation is set to become the world’s third- largest luxury market in five years, Bain & Co. said May 3. Mainland China will remain the fastest-growing market for luxury goods in 2011 as sales rise 25 percent to 11.5 billion euros ($16.6 billion), the Boston-based consulting company said.
The stake sale will help free Shanghai Jahwa United, maker of Herborist brand beauty products and GF men’s cosmetics, from government-imposed constraints of investing only in the industry, Ge said. “With a new major shareholder, we’ll be able to broaden our business and to do whatever we want,” he said. “We’ve been in the cosmetics market for so many years and its growth potential is far from being fully unleashed.”
Shanghai Jahwa had a 1.6 percent share of China’s beauty and personal care products market, which is expected to surge 58 percent to 255 billion yuan in 2015 from 2010, according to London-based researcher Euromonitor International.
Overseas Acquisitions
After the stake sale, the group also plans to invest in food, jewelry, watches and the boutique hotel sector, which have higher margins, Ge, 64, said at the company’s headquarters in Shanghai.
The group will also look to acquire overseas cosmetic brands, he said. “Global rivals have grown quickly through acquisitions. After the restructure, we will do that, too.”
Foreign companies have approached Shanghai Jahwa, including an Australian company that makes natural essential oils, he said, without elaborating.
Shanghai Jahwa United, whose shares have been suspended since December as the company is in negotiations with investors to sell its stake, aims to compete with foreign cosmetic makers, such as Procter & Gamble Co. (PG)
The company last year held a marketing campaign for “Shanghai VIVE,” a high-end line founded in 1898. The products, whose package is designed by Demos Chiang, great grandson of Chiang Kai-Shek, include a moisturizer that sells for 1,080 yuan and a perfume priced at 980 yuan. Chiang’s Kuomintang, or Nationalists, fled to Taiwan in 1949 after losing a civil war to Mao Zedong’s Communists.
The cosmetics maker made a profit of 276 million yuan on sales of 3 billion yuan in 2010, the fifth consecutive year that net income has grown, according to data compiled by Bloomberg.