Czech food producer Hame seen next on the menu for Chinese giant

By bne IntelliNews November 10, 2015

bne IntelliNews -

Following a smorgasbord of acquisitions in late summer, China Energy Company Limited (CEFC) is eyeing yet another small Czech purchase, with food producer Hame in its sights, local media claimed on November 10.

Slovak investment group J&T Group, a local partner of CEFC, is assisting the Chinese company in negotiating the eventual purchase, unnamed sources told Lidove Noviny. The report will likely further boost suspicions that CEFC is more likely quietly financing J&T acquisition targets, rather than collecting assets for its own portfolio.

Nordic Partners Group put Hame up for sale six years after it bought it for CZK4.5bn (€166mn). One of the Czech Republic’s leading food companies, the maker of pate and other processed foods closed the first half of 2015 with revenues of CZK2.89bn, up 14% y/y. 

Another suitor for Hame is reportedly Hartenberg Capital, an investment fund controlled by billionaire Czech Finance Minister Andrej Babis, who owns agricultural, foods and chemicals conglomerate Agrofert. Earlier media reports also suggested Norwegian food conglomerate Orkla might be interested. The value of Hame remains close to CZK4.5bn, Lidove Noviny estimates.

Size matters

Neither the size of Hame, nor the sector in which it works appears to have much connection to CEFC, which in October paid CZK1.94bn (€72mn) to increase its stake in J&T Group to 8.8% as part of a plan to further boost its holding up to 30% eventually. Then again, no one seems to know much about the mysterious, self-proclaimed international energy giant from Asia.

CEFC's acquisition of an increased stake in the closely-held Slovak financial group came amida buying spree that saw it acquire a Czech brewery, a football club and a high-profile historic building in the centre of Prague, as well as small stakes in a charter airline and media. The Chinese energy giant says it is seeking to make the Central European country a base for its European investments.

However, the acquisitions appear more to suit the profile of J&T, which runs retail chains and real estate deals in the region. On top of that, there is speculation that CEFC could be bankrolling the voracious appetite of EPH - an energy holding controlled by J&T-linked figures. Despite several large acquisitions in recent years, the company continues to hunt huge deals across the region, and increasingly in Western Europe.

Keys to the war chest

Several Czech officials have claimed CEFC's shopping spree is proof that the country has found a route to secure Chinese investment. The entire CEE region has been long been eyeing Beijing's massive investment war chest, but has largely failed to find the key to open it. President Milos Zeman has been particularly active, making more than one controversial trip to China in the last couple of years.

However, an opinion piece in Lidove Noviny suggests the Chinese company is on a promise from Prague. This does not mean Chinese investments in the Czech Republic are not interesting, writes columnist Jan Machacek, noting Chinese President Xi Jinping's recent trip to the UK to agree deals on infrastructure and energy, but they're interesting mainly in connection with CEFC's close relations to the Chinese military and intelligence.

He suggests the Chinese have been promised a larger, unknown prize to welcome them – perhaps an airport, refinery, or big state contract. Other analysts have suggested to bne IntelliNews that the Chinese company is especially interested in the accounts reportedly held by numerous Central European oligarchs at J&T Banka.

Either way, what appears clear is that few in the Czech Republic believe the Chinese company has come to the country to sell pate and beer and watch the football.

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