Fosun cooks up deal for Malaysian eatery chain

A leading domestic investment company, Fosun International Ltd, plans to invest in a Malaysian restaurant chain that it believes will be increasingly popular among the middle-class in China.

Fosun will invest about 200 million yuan ($33 million) in Secret Recipe Sdn Bhd through a US dollar-denominated fund via Hong Kong-listed Fosun International, said Qian Jiannong, president of Fosun Tourism & Commercial Group.

He said the company will be the second-largest shareholder of Secret Recipe, without specifying the size of the equity stake.

"Secret Recipe is a leading lifestyle brand in Southeast Asia and happens to fill in a blank in the China market. We believe it will grow well here as Chinese youngsters become more affluent and attach more importance to healthy and stylish eating," Qian said.

According to the China Cuisine Association, the growth of the food and drink industry in China slid to a 21-year low in 2013. High-end restaurants in particular were hard-hit by the central government's austerity campaign.

But experts still believe the potential is huge for the middle-and high-end catering business.

Guo Guangchang, founder and chairman of Fosun, has previously said casual dining in China will continue to boom, with a compound annual growth rate of almost 28 percent from 2012 to 2016, and Fosun is "very optimistic" about the prospects for casual dining.

"We do not focus on the most expensive [restaurants] but on the fashionable but affordable ones that match closely with the mass market's tastes and spending power," said Qian.

Guo has said the group will meld "Chinese momentum to global resources". Fosun bought a 10 percent stake in Club Mediterranee, the French resort operator, in 2010. It has also invested in Folli Follie, a Greek fashion group, and St. John Knits International Inc, an American apparel company.

"Consumption has been a major field that Fosun has been focusing on, together with financial services, manufacturing upgrades, resources and energy," said Ye Shangzhi, chief strategist with First Shanghai Financial Group.

However, since the group has made frequent investments in a broad range of fields, it's hard to assess the risks of acquisitions or the prospects for integration.

Rating agency Moody's Investors Service put Fosun's debt under review for a possible downgrade in late January, citing uncertainties over its funding plans for the 1 billion euro ($1.35 billion) purchase of the insurance arm of a Portuguese state bank.

According to Fosun International's interim report, the company's total debt grew from 56.9 billion yuan at the end of 2012 to 65 billion yuan at the end of June 2013. Its debt-to-asset ratio rose from 64.7 percent to 66.2 percent during the same period.

Secret Recipe, founded in 1997, operates more than 300 restaurants in 10 nations, including Malaysia, China, Singapore and Thailand. The company already has more than 50 restaurants in China serving pastries, coffee and South Asian-style simple meals.

A company spokesman said Secret Recipe plans to open 100 new restaurants in China after Fosun becomes a shareholder.