CJ CheilJedang to sell feed, livestock unit for $1.4 bn

South Korean food giant CJ CheilJedang Corp. is seeking again to sell its loss-making feed and livestock subsidiary, Asia’s largest in the industry, for as much as $1.4 billion to focus on its main business.

CJ CheilJedang, known for its leading brand Bibigo, has been selecting advisors to sell a 100% stake in CJ Feed&Care, a wholly owned subsidiary split off from the parent in July 2019 for the biological resources business, investment banking industry sources on Friday. CJ Feed&Care manufactures feed and sells livestock, especially pigs and chickens.

CJ CheilJedang, the flagship unit of South Korea’s food-to-entertainment conglomerate CJ Group, aims to sell the subsidiary for up to 2 trillion won ($1.4 billion), although it may be difficult to find a buyer with that price tag given the unit’s sluggish earnings, the sources said.

CJ Feed&Care reported an operating loss of 86.4 billion won last year, swinging from a profit of 7.7 billion won in 2022. That figure was already a sharp drop from 2021's profit of 150.6 billion. The company was the only CJ CheilJdang subsidiary to post an operating loss last year.

“CJ is expected to emphasize that earnings will significantly improve from this year as the feed business usually has a high correlation with the global market changes,” said one of the sources. “They are highly likely to set a sale price based on the average operating profit of around 100 billion won for the last five years.”

The seller is also predicted to attract buyers with CJ Feed&Care’s large business networks as it is the largest player in Asia’s feed and livestock industries, industry sources in Seoul said. Global industry competitors may be more interested than financial investors, they added. 

ALREADY ATTEMPTED TO SELL THE UNIT TWICE

CJ CheilJedang already put the subsidiary up for sale twice, once in 2019 and again in 2020.

In 2019, it negotiated with Nutreco N.V., a Dutch feed producer, for the sale as the South Korean company faced financial issues due to borrowings for the acquisition of Schwan’s Co., a US frozen food maker. The talks collapsed, however, as they could not agree on the sale price.

CJ CheilJedang attempted to sell the unit again the following year by selecting a global investment bank as an advisor but failed as few were interested.

CJ Feed&Care’s latest loss resulted from economic slowdowns in Indonesia and Vietnam where it generates 70% of total sales. The company focuses on the broiler business in Indonesia and pig farming in Vietnam.

Operations in the two Southeast Asian countries came under pressure as sales declined on weakening demand while fixed costs increased. Expenses significantly grew on the rising costs of grains and labor.

RESTRUCTURING

With CJ Feed&Care’s sluggish business, the parent CJ CheilJedang suffered a 22.4% drop in its operating profit on a consolidated basis last year.

CJ Group in February reshuffled the food giant’s top management to reinvigorate the company’s sagging growth momentum.

CJ CheilJedang sold two overseas units last year to focus on its main food business.

It sold its entire 66% stake in Brazilian soybean crusher CJ Selecta S.A., to grain products maker Bunge Alimentos S.A., US food company Bunge’s unit in the South American country, last October.

In July 2023, CJ CheilJedang also sold a 60% stake in Sichuan Jixiangju Food Co., which generated 46% of the South Korean company’s sales in China, for some 300 billion won to concentrate on the K-food business and improve financial conditions.

Write to Ji-Eun Han and Jun-Ho Cha at hazzys@hankyung.com
 
Jongwoo Cheon edited this article.