Legend expands food business with seafood deal

IT-focused conglomerate aims to diversify its business further by paying $831 million for a majority stake in a South American salmon producer.

Legend Holdings said on Monday that it has acquired a controlling stake in a Chilean seafood company for Rmb5.8 billion ($831 million). It is one of China’s biggest corporate outbound transactions this year as the information technology-heavy conglomerate continues to diversify its business.

The acquisition of a 94.47% stake in Australis Seafoods will be made through Joyvio Group, Legend’s agriculture and food subsidiary that already owns stakes in a number of seafood businesses such as China’s Qingdao Starfish and Australia’s Kailis Bros, the company said in a statement.

Australis Seafoods owns multiple salmon producing licenses in Chile and produced 64,000 tons of salmon last year. This represents 9% of the country’s total output.

Hong Kong-listed Legend Holdings is best-known as the parent of Lenovo Group, the world’s largest personal computer maker, which contributed nearly 95% of its revenue last year.

As such, the other business lines – financial services, innovative consumption and services, agriculture and food, and new materials – are fairly unfamiliar to public investors.

The size of the acquisition, however, is by no means small when compared with Legend’s agriculture and food segment. Australis Seafoods’ total revenue of $399 million last year was already about 56% of the segment’s 2017 revenue.

The price tag values the Santiago-listed company at $880 million and equates to about 12 times the company’s net profit of $73.4 million last year. From an Asian context, Legend has perhaps struck a cheap deal since most of the region’s seafood companies are trading at about 15 times earnings.

Legend said that the transaction is in line with its strategy to acquire overseas resources for Chinese consumption. It added that salmon has been a scarce resource globally due to limited breeding farms and licensed operation requirements.

The acquisition of Australis Seafoods extends Legend’s long list of investments so far this year.

The conglomerate, which primarily invests in Chinese private companies through its venture capital arm Legend Capital, has announced investments into coffee chain Luckin Coffee, pharmaceutical startup Harbour BioMed, industrial product supplier Zhenkunhang, customer service outsourcing firm Udesk and e-commerce startup Aikucun, among others.

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