M&A

Why Su got out of the kitchen

France’s Groupe SEB takes control of China’s biggest cookware firm

Erstwhile cooker king: Su

Z hu Xinli, chairman at Huiyuan Juice, has a way with words. Defending himself from patriotic critics during Coke’s (aborted) bid for Huiyuan in 2009, Zhu insisted that all the best entrepreneurs “breed a company like a son, but sell it like a pig”.

The idea: build your business up with fatherly diligence but never get too attached to it. And then sell when the profits are fat ones.

Su Zengfu, who founded Supor, the country’s largest cookware company, apparently subscribes to a similar philosophy. He recently sold most of his remaining stake in the company he founded 20 years ago to Groupe SEB, a French firm.

SEB, which already held just over half of Supor, has agreed to buy out shares owned by the Su family for Rmb3.5 billion ($525.9 million). The deal boosts SEB’s stake to 71.3%, although the French company’s website states the Su family will still hold a 12.5% stake.

Some commentators were puzzled as to why Su wanted to sell more of his stock. Supor, the largest manufacturer of pressure cookers and the second biggest maker of electric rice cookers, controls over a third of China’s cookware market, which has annual sales of close to Rmb18 billion. Last October, the company announced net profit for fiscal year 2010 was up by 30% year-on-year to Rmb400 million. Guotai Junan Securities reckons revenues could grow 30% more annually over the next three years.

But it seems Su’s ambitions have long extended beyond the kitchen. The Supor Group (the parent company) has strayed far from its cookwear roots, to acquire businesses in industries like tourism, ports, logistics and pharmaceuticals. Su has spent less time on his cookware business as a result, leaving it to his son to manage while he attended to his sprawling empire, says China Economic Information.

In one of his biggest projects, a port in Taizhou, Zhejiang, Su was reckoned to have spent over Rmb500 million in construction alone. Like so many other self-made men, he also dabbled increasingly in property investment.

To finance his dealings, Su needed capital. Strapped for cash back in 2004, Supor listed on the Shenzhen Stock Exchange, raising over Rmb400 million.

Then SEB arrived on the scene. The deal was made in 2006, when Su agreed to sell 30% of Supor to the French company. That wasn’t to the liking of Supor’s domestic rivals, who claimed the combined reach of the two companies would be anti-competitive. Still, after much delay, Beijing finally gave the green light in April 2007. Still keen as mustard, SEB raised its stake to 51% a few months later. Most of the money Su made went into paying off Supor’s holding company debt.

“The problem is that there is little synergy between all the industries or with the Supor’s core business – cookware,” says Feng Diansheng at Chinese research outfit CCID Consulting. “And the Su family has chosen industries that typically require large upfront capital investment, like property development and ports. It is going to take a long time before he makes any money.”

Meanwhile, as SEB increases its stake in the Supor cookware business, mainland competitors are again banging the antitrust drum.

The tactic looks unlikely to work, although completion of the deal is pending on regulatory approvals. IT Times reckons SEB will exploit Supor’s existing distribution to introduce its own products, and that there is talk that the French will launch its more expensive cookware line Lagostina in China (whose brand spokesperson is Sophia Loren, no less).

Other brands may follow: SEB’s product range also includes Tefal, Moulinex and Rowenta.

For those wondering what’s next for Su, he says his next focus will be medical equipment like stainless steel trays and sinks. “In five to 10 years, I’ll give you another star enterprise like Supor,” Su told China Economic Information.


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