FountainVest wins approval for China jewelry take-private
A consortium comprising FountainVest Partners and the chairman and CEO of NASDAQ-listed jeweler LJ International has won board approval to take the company private in a deal worth about $64 million. It is the seventh PE-backed privatization of US-listed Chinese company to secure approval in the last five months, two of which involve FountainVest.
Vehicles controlled by the chairman and CEO, Yu-Chuan Yih, FountainVest China Growth Capital Fund and several rollover shareholders, including executives at LJ, will pay $2 per ordinary share in LJ. This represents a 24.2% premium over the August 10 closing price, the last trading day before the offer was submitted.
The consortium said in its initial proposal that the transaction would be financed through equity, although it may explore potential debt financing as appropriate.
Consortium members already own approximately 18.2% of LJ. The take-private proposal will now be put to a shareholder vote with support from a majority of participants required for the transaction to proceed.
Founded in 1987 in Hong Kong, LJ distributes colored gemstone and diamond jewelry through retail and wholesale channels. The company reported net income of $10.1 million in 2011, down from $13 million the previous year, although operating revenues rose about 30% to $182 million.
In April 2011, FountainVest also partnered with Spring Capital Asia to buy a 28.27% stake in Enzo Jewelry - a China-based subsidiary of LJ - for more than $41 million.
Between April 2010 and November 2012, a total of 49 take-private transactions were announced, according to Roth Capital Partners, with 19 reaching a close, four terminated and 26 in process. The last 12 months have seen significant activity: 10 deals were underway at the start of 2012, rising to 20 by the end of it.
Five private-equity backed deals have closed and AVCJ has records of 14 still in progress. Of these, eight have received board approval, most recently Morgan Stanley Private Equity Asia's $147 million management buyout of Chinese dairy producer Feihe International.
FountainVest is also involved in the $3.7 billion take-private of Focus Media, alongside The Carlyle Group, CITIC Capital and China Everbright. It received board approval in December.
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