This is an English adaptation of a FoodBud historical article originally published on April 4, 2022.
In March 2022, PAG, one of Asia’s largest independent alternative investment management groups, filed an application to list on the Hong Kong Stock Exchange main board. Earlier public reports said the offering could raise as much as US$2 billion, potentially making it Hong Kong’s largest IPO of the year.
According to the prospectus, PAG’s business was organized around three segments: Credit & Markets, Private Equity, and Real Assets. As of the end of 2021, assets under management exceeded US$47 billion. Credit & Markets accounted for 45%, or about US$21 billion; Private Equity accounted for 19%, or about US$17 billion; and Real Assets accounted for 36%, or about US$9 billion.
PAG also disclosed foodservice-related holdings in its portfolio, including The Cheesecake Shop, Craveable Brands, Nayuki, and %Arabica.
Beyond those disclosed holdings, PAG invested in Singapore-based Paradise Group in 2016. In 2020, it became a shareholder in Silver Crest Acquisition Corp, a SPAC, with a 6.8% stake. In August 2021, Tims China announced that it had agreed to list on Nasdaq through a merger with Silver Crest Acquisition Corp.
In November 2021, PAG also acquired Gyro Holdings, a Japanese foodservice brand operator.
PAG co-founder and executive chairman Shan Weijian told Nikkei that while the restaurant industry had been hit by the pandemic, PAG believed the pandemic would eventually end and the sector would recover, making it a potentially attractive time for acquisitions.
Gyro Holdings, acquired by PAG, was founded in 2006. It operated more than 90 brands and over 200 outlets, spanning formats from izakaya to premium dining. The transaction value was not disclosed.
With PAG’s backing, Gyro Holdings was expected to continue focusing on expansion in Asia and Japan.
PAG had more than 100 employees in Tokyo, with much of its Japan investment activity concentrated in real estate. In 2013, PAG invested US$250 million in Universal Studios Japan and exited successfully four years later.
Shan Weijian said in an interview that he remained positive on Japan. As the population ages, he argued, companies would look to replace labor with technology, and Japan is strong in robotics and industrial automation.
PAG’s portfolio disclosure also included an investment in %Arabica.
According to %Arabica’s official website at the time, the brand had 57 stores in China, while Japan, where %Arabica originated, had only 4 stores.
The operating company for %Arabica in China was Shanghai Arabica. In the 2019 annual report of listed company Longhui International Holdings, Shanghai Arabica was shown as controlled by Longhui International’s controlling shareholder and involved in related-party transactions in 2019.
However, in Longhui International’s 2020 and 2021 annual reports, Shanghai Arabica no longer appeared in the related-party transaction section.
Corporate change records for Shanghai Arabica showed that in April 2021, two directors were added: Yuan Mingjie and Huang Dewei. Yuan Mingjie was an executive director of Longhui International Holdings. Huang Dewei was a PAG partner and a non-executive director of Nayuki.
Market rumors at the time suggested that PAG may have obtained the China operating rights for %Arabica and could gradually increase its involvement to secure more market agency rights for the brand globally.
In 2016, PAG announced an investment in Paradise Group, a Singapore-based restaurant chain group. The transaction amount was not disclosed.
According to Paradise Group’s official website, the company was founded in 2008 and operated more than 100 stores across Singapore, China, Malaysia, and other markets. It had 13 brands and was described as one of Southeast Asia’s largest and best-known Chinese restaurant groups.
In 2019, Bloomberg reported that PAG was considering selling its stake in Paradise Group. People familiar with the matter said Paradise Group could be valued at as much as US$367 million.
In 2017, PAG announced the acquisition of Australian bakery chain The Cheesecake Shop. Media reports said The Cheesecake Shop was valued at US$76 million.
In February 2022, PAG reached an agreement with River Capital to sell The Cheesecake Shop to River Capital. Specific transaction details were not disclosed.
The Cheesecake Shop was founded in 1991. According to its official website, it had more than 220 stores in Australia and New Zealand. Its franchisees served 5 million customers annually, and annual sales exceeded US$155 million.
After River Capital completed the acquisition, River Capital executive Jim Craig and former Domino’s Pizza executive Andrew Rennie were expected to join The Cheesecake Shop’s board.
River Capital and The Cheesecake Shop’s management planned to grow the franchise business. At the time, more than one quarter of stores were operated by franchisees owning two or more locations.
In July 2019, PAG acquired 100% of Craveable Brands from parent company Archer Capital and other shareholders.
PAG partner Pan Linfeng told media that the Craveable Brands acquisition was part of the company’s strategic expansion. He said Craveable Brands was a strong franchise group and could create synergies with The Cheesecake Shop.
People familiar with the deal said PAG paid about US$500 million. At the time, Craveable Brands had annual system sales of more than US$800 million. The company, formerly Quick Service Restaurant Holdings, was an Australian quick-service restaurant group.
Craveable Brands operated three fast-food brands: Red Rooster, Oporto, and Chicken Treat, with more than 580 stores in total.
Red Rooster was founded in 1972 and had more than 360 stores. Chicken Treat was founded in 1976 and had 55 stores in Western Australia. Oporto was founded in 1986 and had more than 170 stores across New Zealand, Singapore, Sri Lanka, Vietnam, and other markets.
In December 2020, shortly before Nayuki’s listing, PAG invested US$100 million in the company at a valuation of US$1.61 billion, equivalent to RMB 10.2 billion.
Nayuki listed successfully on the Hong Kong Stock Exchange in 2021. By the time of the article, its market capitalization was only HK$8.37 billion, equivalent to RMB 6.8 billion, meaning its valuation had fallen by RMB 3.4 billion. The article estimated that PAG’s investment had lost more than RMB 200 million.
The article noted that PAG was temporarily facing a heavy paper loss on Nayuki and that it was uncertain when Nayuki’s share price might recover to PAG’s entry valuation.
The SPAC that Tims China planned to merge with, Silver Crest Acquisition Corp, was led primarily by Ascendent Capital. Ascendent had previously appeared in the public eye during the RYB Education kindergarten incident, when it was RYB’s largest shareholder. It had also invested in Meituan-Dianping and Wumart.
According to Silver Crest Acquisition Corp’s 2021 annual report, Silver Crest Management LLC held 20%. PAG’s stake rose from 6.8% in 2020 to 6.9% in 2021, mainly because the number of shares held increased. Ascendent Capital founding partner Leon Meng held 20%.
Other shareholders of the SPAC included a company formed by Christopher Lawrence, Derek Cheung, Andy Bryant, Steeve Hagege, Long Wei, and Tong Mei, which held 20%. Derek Cheung was managing director and director at Ascendent Capital; Andy Bryant was former Intel chairman; Steeve Hagege was former CEO of L’Oreal’s venture fund BOLD; Long Wei was founder of Light-Up Capital; and Tong Mei was a senior advisor at InterChina Partners. Citadel, one of the world’s largest hedge funds, also held 20%.
A March announcement from Silver Crest Acquisition Corp showed that Tims China had received investment commitments from institutional investors including Cartesian Capital Group, Restaurant Brands International, and Silver Crest Management LLC. These investors would invest up to US$94.5 million through a private investment in public equity, or PIPE, when the merger was completed.
Tims China had also signed a letter of intent for a US$100 million share subscription commitment with a global financial services company. Under that financing facility, Tims China would have the right to sell up to US$100 million of ordinary shares to the institution over a 36-month period.
At the same time, Tims China’s pre-merger valuation was reduced from US$1.688 billion to US$1.4 billion. The merger termination date with Silver Crest Acquisition Corp was extended to June 30, 2022. The earlier plan had been to complete the merger and listing in the first quarter of 2022.
The article characterized PAG’s restaurant-sector acquisitions as relatively aggressive after the pandemic, based on the view that the timing was attractive and that private equity investors could hold assets for longer than public-market investors.
Its foodservice exposure was concentrated in beverages, bakery, fast food, and multi-brand restaurant groups.
The opportunity set was described as broadly similar to the market logic disclosed by Silver Crest Acquisition Corp:
At the time, PAG’s foodservice focus was mainly in Asia-Pacific, especially China, Japan, Southeast Asia, and Australia.
Note: IPO, valuation, merger, financing, and forward-looking figures in this article are historical and reflect the source article’s April 2022 context.