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November 5, 2009

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Goldman earns 5 times from stake sale

GOLDMAN Sachs has agreed to sell half of its holding in Shineway Group, China's top meat processor, to a Chinese fund for about US$150 million, earning roughly five times its investment from the landmark 2006 deal, sources with direct knowledge of the matter said yesterday.

The acquisition attracted wide public interest in 2006, in part because it involved foreign investors taking a stake in a national brand and industry leader. It was also among the first leveraged buyouts in China by a group of foreign investors, which included Singapore's state investor Temasek Holdings.

Sources said the Asia Special Situation Group of Goldman Sachs signed a deal last week to sell part of its stake in Shineway to CDH Investments, an influential Chinese private equity fund and already a major shareholder of the meat processor.

Shineway, well known in China for its sausage products, has a listed arm, Henan Shuanghui Investment and Development Co.

ASSG was one of Goldman's best and fastest profit streams in the region, but its prominence within Goldman has faded since the financial crisis. Several ASSG star bankers, including its co-head Zhang Yi, have left the firm.

"ASSG is now under pressure to improve its performance. After all, it is not a long-term investor for such deals like Shineway either," said one source.

"But CDH has long-term commitment to Shineway given its strong Chinese background and good relations with the government," he added.

CDH Investments, established in 2002, is a spin-off from China International Capital Corp, the investment banking joint venture one-third owned by Morgan Stanley.

Shineway, Goldman Sachs and CDH declined to comment. The sources declined to be identified because the sale process is private and confidential.


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