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China food IPO buys into high-end supplier

AAP logoAAP 29/11/2016 Prashant Mehra

A Chinese food group is pursuing a major stake in an Australian company that supplies fresh produce to top local restaurants including Rockpool, in a move to secure high-end products for its shops and restaurant clients in China.

Guangdong-based Winha will pay $2 million for a 49 per cent stake in Melbourne-based Flavours, which supplies to several top restaurants in Sydney and Melbourne including Rockpool, and to the Qantas First Class lounges.

Winha will also have an option to buy the remaining 51 per cent stake in 2019.

The deal is be funded through a planned listing on the Australian Securities Exchange to raise up to $10 million.

Winha Commerce and Trade International Ltd hopes to issue shares at 35 cents each, which will give the company a valuation of up to $35 million on listing.

Under the deal, Flavours will source and sell high-grade Australian fruit, vegetables, meat, honey and cherries to Winha for the Chinese market, Winha chairman Jackie Chung said.

Flavours is a providore founded in 2013 by former chefs Peter Cannavo and Jason Elbob, who will remain with the company and retain majority control.

Mr Chung, speaking at a briefing on the planned IPO in Sydney, said he expects the business to grow rapidly following the free trade agreement between the two countries coming into effect last December.

Winha currently operates 44 franchise stores, six retail stores and one supermarket - all in China's Guangdong province - through which it retails locally produced specialty foods and beverages to a growing middle class customer base. It also sells products online.

Over the past two years, it has set up food halls to provide fresh food dining to customers, and also supplies products to other restaurants, which it claims has accounted for a surge in business in the last financial year.

It had sales of $57.6 million and net profit of $10.3 million in FY2016, according to its draft prospectus. This was a substantial jump from $10.3 million in revenue and $5.4 million profit in the previous year.

Despite increasing appetite for Australian food products in China, Winha also plans to continue expanding its sourcing of local produce in China, with a significant part of the Australian fundraising proceeds earmarked for cultivating orchards and farms in China and expanding its retail network there.

In July, the group leased 41 fruit orchards and 10 vegetable farms across China. Local food produce will continue to account for at least two thirds of the company's revenue in future years, the group says.

Winha hopes to secure regulatory approval for its fundraising this week, with the offer slated to close by December 12.

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