Jiuding Capital Invests 40 Million Yuan in China’s Biggest Agricultural Machinery Chain Enterprise G

2009-05-11

Jiuding Capital Co., Ltd. (hereinafter referred to as Jiuding Capital) has entered into an equity investment agreement with Sichuan Gifore Agricultural Machinery Co., Ltd. (hereinafter referred to as Gifore) with an investment of 40 million yuan.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Jiuding Capital decides to invest after six-month investigationExt九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The investment in Gifore was approved at a decision conference at the end of March.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

 “The investment is very beneficial to Gifore’s development from the very beginning, because it can absorb talented persons, realize province-level market expansion, set up management information systems and enhance its brand image,” Jiuding Capital Executive President Zhongyi ZHAO said, “This is also the reason why Gifore agrees to cooperate with us.”Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Founded in Chengdu in 1990s, Gifore has been engaged in the businesses of agency, sale and service of agricultural machinery, which has grown very fast in terms of business scale and profitability. As of 2008, its annual sales amounts of agricultural machinery have reached hundreds of millions of yuan.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

According to statistics of the industrial association, Gifore has become China’s biggest trans-regional agricultural machinery sales company in the chain operation mode although its sales are less than some agricultural machinery retailers in Northern China.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Hundreds of chain and sales stores have been set up by Gifore in Sichuan, Chongqing, Guizhou, Yunnan, Guangxi and other southwest cities and provinces. Besides, Gifore is going to build up a nation-wide agricultural machinery managing service system finally.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Such expansion needs strong financial support. Gifore planned to list on China’s A-share market, but the exact time cannot be sure because it is uneasy to resume initial public offerings (IPO). Finally Gifore accepted PE financing to develop further.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Jiuding Capital began to contact Gifore in the fourth quarter of 2008. Jiuding Capital’s Business Director Chen Liumin, also the leader of the project, has taken several months to investigate the project.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Chen Liumin said that his team members have traveled around Gifore’s headquarters and Chengdu for many times, and stayed in Chengdu for almost half a month each time. They have investigated Gifore’s business regions, visited some insiders and finally agreed to invest after nearly half year’s efforts.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

This investment will increase its strength of realizing further business expansion without doubt.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Chain Operation ModeExt九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The business mode, management team and industrial background were highly valued by Jiuding Capital among the investment. Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Chinese agricultural machinery was once brilliant and a very big national circulation system was formed. However, the nationwide sales network was broken up due to China’s structural reform in the late 1990s. Agricultural machinery companies had to survive in a small or medium scale.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Gifore’s chain operation mode can fully adapt to the features of agricultural machinery industry like scattered production, scattered use, great variety, high profession and seasonal use, because the mode has obvious advantages against those individual dealers throughout the country or the sales networks set up by some enterprises. Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Nevertheless, the operation rule of an industry cannot be changed by any business modes. “Gifore has also suffered a lot during development but the mode was used by its team”, said Chen Liumin. He admitted that this point is highly thought while investigating. It is the insistence that helps Gifore get a lot. Recently, China’s rural areas and agricultural industry have entered into a new stage of market-driven, intensive and mechanized development thanks to fast economic development. Over the past five years, the average growth rate of agricultural industry’s industrial output has reached 20%, much higher than that of GDP. In 2008, the output reached approximate 20 billion yuan.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Hence, the real demands about agricultural machinery of peasants and agricultural machinery dealers have been highly stimulated and the mode been successfully applied to Sichuan, Chongqing and other regions in China.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

However, Chen Liumin thought China’s agricultural machinery industry still has a development space. He said, “The mechanization level of China’s agricultural machinery is very low, and mechanization rate is only 40%, namely the middle stage equivalent to the levels of the USA in 1910, Japan in 1947 and Korea in 1972. It will take a long way to reach the higher stage of 70%.”Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Meanwhile, Chinese government is strengthening its support to this industry.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

As an active PE firm in China, Jiuding Capital has finished several projects recently. “It’s very common when PE firms are active. During 2007 and the first half of 2008, we had been constrained because the markets were crazy”, said Zhongyi ZHAO, “We will properly strengthen the investment this year.”Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Excellent investment organizations should not follow others without destination and can judge by themselves. “If the market is thriving, it’s better to be more cautious; if the market remains weak, it’s better to take resolute measures,” he thought.Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

All in all, the global financial crisis has brought Jiuding Capital very good investment chances. He analyzed that, “Really good enterprises emerge at this time and the investment cost is relatively low, all of which are very beneficial. Based on the analysis, we begin to invest in Gifore.”Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


Ext九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

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