PE consortium in $330m take-private bid for China's Yongye

The consortium, led by Chairman and CEO Zishen Wu, has offered to pay $6.60 apiece for all Yongye shares it doesn't already own. This represents a 38% premium on the company's October 12 closing price.

The acquisition would be financed through a combination of equity capital provided by the buyers and their affiliates - in the form of cash of cash and rollover equity in the company - and debt sourced from third-party financial institutions. 

A Chinese bank experienced in financing take-private transactions is said to have expressed interest in covering the debt portion. 

Beijing-based Yongye is a leading crop nutrients company with production facilities located in Inner Mongolia. Its principal product is a liquid crop nutrient but the company also produces a powder animal nutrient for dairy cows. Both are sold under the "Shengmingsu" brand.

The deal is part of a wider trend of US-listed Chinese firms going private in the wake of depressed public market valuations. Most companies took a hit after financial inconsistencies were uncovered in filings made by several firms that went public via reverse mergers.

Short sellers have also launched attacks on a number of these firms.

Last May, Yongye's stock was already down 48% for the year when hedge fund Absaroka Capital Management accused the company of manipulating its earnings, prompting a further single-day decline of 19%.

MSPEA came to Yongye's rescue, announcing a $50 million investment in the company, which saw the stock soar 42% in a matter of hours.

Since April 2010, 30 US-listed Chinese companies have announced take-private deals: 14 have closed, two were terminated and 14 are still in progress. Eight of the 30 are private equity-backed management buyouts (MBO).

Abax, in which Morgan Stanley Investment Management owns a minority stake, has figured in two of these deals. In June 2011, a $463.8 million MBO for Harbin Electric, which was supported by Abax, won board approval. The private equity firm is also involved in a $363.8 million buyout of US-listed Chinese wire manufacturer Fushi Copperweld.

 

 

 

 

 

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• Topics
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• buyout