Hony gobbles up PizzaExpress for $1.5b

China's Hony Capital Ltd's acquisition of the United Kingdom restaurant chain PizzaExpress Ltd, the largest acquisition in five years in the European restaurant sector, also signifies China's soaring appetite for foreign food.

Beijing-based private equity firm Hony Capital announced on Saturday that it will buy PizzaExpress for about 900 million pounds ($1.54 billion). Hony will take control of the pizza producer from Gondola Group Ltd, owned by the London-based private equity firm Cinven Ltd.

PizzaExpress has 436 sites in the UK and 68 sites internationally, with 22 in China (12 in Hong Kong, nine in Shanghai and one in Beijing), according to a joint statement by Gondola and Hony.

"PizzaExpress has good penetration in the Shanghai market. It is popular among middle- to high-end consumers. Also, since it seems to have already established a good business model and management system, expansion will be easy for the new operator, as long as it has sufficient capital," said Han Jin, who runs a food importer in Shanghai.

"With PizzaExpress, we have the opportunity to leverage our local expertise to accelerate its growth in the Chinese market, as well as keep on driving its business forward in the UK," said John Zhao, chief executive officer of Hony.

Hony did not specify its strategy for PizzaExpress, but Han said China will definitely be a major market in the future.

More people can afford 200 yuan ($32) or more each on a meal, a group that PizzaExpress is targeting in China, he said, adding that nine stores in Shanghai are not really that large a number, while the potential in cities such as Beijing, Guangzhou and Shenzhen is also immense.

Hony's acquisition is the latest buy by a Chinese company in the global market's food and drink sector. In February, Hony's peer, Shanghai-based Fosun International Ltd, said it would become the second-biggest shareholder of Malaysia-based restaurant chain Secret Recipe, by injecting 210.5 million yuan.

In May, another Shanghai-based conglomerate, Bright Food (Group) Co Ltd, agreed to pay about $960 million for a majority stake in Israel's Tnuva Food Industries Ltd.

Last year, China's WH Group Ltd, the world's biggest pork producer, bought Smithfield Foods Inc for $4.7 billion, making it the largest Chinese purchase of a United States company.

Outbound mergers and acquisitions in the food and beverage industries accounted for 17 percent of total M&A deals originating in China as of June, versus 20 percent from the energy and power sector - traditionally the biggest deal generator, according to Reuters.

"As China's middle class becomes richer, their taste for goods and services will become more sophisticated. Local supply is not sufficient, so they have to look outside of China. Food security and safety has been a pivotal issue for China," said Yang Zhizhong, chairman and chief executive officer of Nomura China.