A convenience store’s display of snack food.
Jeffrey Greenberg/Universal Images Group via Getty Images
Xu Shihui, the billionaire chairman and chief executive of Dali Foods, has received shareholders’ approval to privatize the $6.5 billion company, with today expected to be its last trading session for a firm that first went public eight years ago.
In a late Wednesday filing to the Hong Kong Stock Exchange, Dali Foods announced the results of its vote on the privatization plan that Xu made back in June. Citing reasons including unsatisfactory share performance and limited equity fundraising ability, the 65-year-old mogul had offered to take the company private at HK$3.75 a share, which represented a 38% premium on its closing price a day earlier.
The proposal caught many by surprise and triggered a jump in Dali Food’s share price. Xu, who derives almost the entirety of his wealth from an 85% stake in the company, subsequently added about $1.2 billion to his net worth.
The mogul, whose wealth currently stands at $7.5 billion, can likely fund the go-private deal with cash on hand. He is expected to pay about $728 million to acquire the rest of the firm he didn’t already own. The amount could easily be covered by the almost $2 billion in dividend payments Xu received from Dali Foods over the years, according to Forbes estimates.
Becoming a private company offers Dali Foods benefits such as more flexibility in implementing strategic decisions and facilitating business transformations, according to the June proposal. Founded by Xu in 1989 in China’s southern city of Quanzhou, Dali Foods once expanded rapidly with its low-cost snacks that are now sold by more than 6,500 distributors across the country. Best known for its Copico potato chips, Heqizheng herbal tea and Haochidian soda crackers, the group went public in 2015 after raising $1.2 billion at the time.
But shares have been trending lower since peaking in 2018, as Dali Foods grapples with challenges ranging from changes in consumer spending habits to the rise of newer brands. In 2022, the company saw its sales decrease 10.5% to $2.7 billion and its net profit dropped 20% to $410.7 million as pandemic-related restrictions also took a toll.
Finding the means to stop the slide in Dali Foods’ earnings will be a family affair. Xu’s 39-year-old daughter, Xu Yangyang, serves as a vice president at the company, his sister, Xu Biying, sits on the board and his brother-in-law, Chen Baoguo, holds a senior management position.
In the first half of 2022, the company launched a new and more expensive soy milk brand called Plant Organic to improve its market positioning. It has also been pursuing a so-called omni-channel strategy to improve sales online.