17 February 2019
Chinese restaurant chains are feeling the pinch of the economic slowdown and Beijing's austerity campaign. Photo: Bloomberg
Chinese restaurant chains are feeling the pinch of the economic slowdown and Beijing's austerity campaign. Photo: Bloomberg

Food sector deals herald new China M&A wave

A couple of restaurant deals are in the news this week, reflecting the big potential of China’s dining-out market as consumer tastes broaden beyond fast-food. One deal has an investment arm of luxury goods giant Louis Vuitton buying a Singaporean restaurant chain with a big China presence, while the other has leading restaurant ratings site Dianping buying into an online take-out dining platform.

Meanwhile, there is also word of another major transaction involving the struggling Dynasty Fine Wines (00828.HK), one of the country’s leading domestic wine producers.

From a broad perspective, all these three deals to some extent reflect new realities arising from China’s recent economic slowdown. The slowdown has created bargains in the market, which is forcing some money-losing companies to find buyers as they lose access to their traditional funding sources. The slowdown is also hurting local consumers’ appetite for more premium products like the red and white wines sold by Dynasty.

All that said, let’s take a closer look at these three new deals beginning with Dianping, which has agreed to buy a stake of Rajax Information, operator of the online food-ordering platform Reports say Dianping will invest tens of millions of US dollars in They suggest that Dianping would only acquire a strategic stake in the company, whose current management would remain in place after the deal.

I’ve had a look at, and the site does indeed look quite complementary to Dianping’s own core business as a platform for restaurant reviews and discount coupons, similar to the popular US site Yelp (YELP.US).’s main site includes a listing of various major cities around China, with links that allow users to order take-out food from restaurants in those cities. Dianping is probably funding the purchase using money it received after it sold 20 percent of itself to Internet giant Tencent (00700.HK) in February. 

From that tie-up, let’s move to Singapore, where local restaurant operator Crystal Jade has been purchased by a fund tied to LVMH Moet Hennessy Louis Vuitton in a deal reportedly valued at about US$100 million. Crystal Jade owns several different chains with a total of 120 outlets; about a sixth of those are in China.

Reports say the Singaporean company will use some of the funds to expand its China presence, where mid- and higher-range restaurants are becoming more popular from the country’s growing middle class. This particular deal comes after another European fund recently purchased a minority stake in South Beauty, another operator of mid- to high-end restaurants in China.

Lastly there’s the deal involving Dynasty, a former high-flyer that rose to prominence on the growing taste for European-style wines among Chinese consumers. After several years of strong growth, Dynasty fell into the loss column in 2012 due to saturation in the market from a flood of both domestic and foreign competitors. 

Dynasty’s Hong Kong-listed shares have been suspended for more than a year amid an ongoing internal investigation, and now the company has announced that a company that holds 45 of its shares will sell that stake to its state-run parent, an arm of the Tianjin municipal government. The buyer, Tsinlien Group, will purchase the stake from Tianjin Development Holdings (00882.HK) for HK$890 million (US$115 million), though the final sale price could change.

This deal looks like a possible prelude to a resumption in trade of Dynasty’s shares, which could be followed by a sale and de-listing of the company. That wouldn’t surprise me, since Dynasty and the broader wine industry are all suffering due to stiff competition as numerous players have flooded into the market over the last few years. China’s slowing economy and the recent government austerity campaign have only worsened the industry’s woes.

More broadly speaking, this recent flurry of food deals could mark the beginning of a bigger flow of similar M&A initiatives, as more restaurant chains and other related businesses feel the pinch of China’s economic slowdown. Weak finances could result in bargain prices at some money-losing operators, which could become attractive targets for cash-rich buyers from both China and abroad.

Bottom line: A new flurry of restaurant and related asset sales could auger the start of an M&A wave, as cash-rich domestic and international investors buy money-losing operators at attractive prices.

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A commentator on China company news and associate professor in the journalism department of Fudan University in Shanghai. Follow him on his blog at

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