NewQuest makes $160m buyout offer for China Hydroelectric
NewQuest Capital Partners has made a take-private offer to US-listed China Hydroelectric that values the company at just over $160 million. The secondary specialist GP already owns 49.83% of China Hydroelectric and holds options and warrants that, if exercised, would increase its stake to 56.8%.
According to a regulatory filing, CPI Ballpark Investments, a NewQuest affiliate, has offered to buy all outstanding American Depository Shares (ADS) at $2.97 apiece. This represents a 33.2% premium to China Hydroelectric's September 3 closing price. The stock closed up 21% at $2.70 on September 4.
Last year, an investor group led by NewQuest instigated the removal of five of China Hydroelectric's seven directors, citing strategic and operational issues at the company and the apparent lack of credibility and accountability on the board. They were replaced by four directors nominated by the investor group.
In addition to NewQuest, which spun out from Bank of America Merrill Lynch in 2011, the group comprised Swiss Re, Tsing Capital and Aqua Resources, as well as two family offices, Abrax and IWU International. They collectively owned 40% of China Hydroelectric and claimed to have invested approximately $170 million in the company since 2008.
CPI Ballpark held a 30.2% as of year-end 2012 and has since accumulated interests from other investors. The 6.97% in options and warrants required to take the NewQuest to 56.8% would come from Vicis Capital.
China Hydroelectric was set up in 2006 to acquire and operate small hydroelectric power projects of less than 50 megawatts in capacity. Over the next three years it raised approximately $350 million through four rounds of private financing and then $100 million when it went public in January 2010.
As of December 2012, it had a total installed capacity of 517.8 MW through 25 hydropower stations - of which 21 were acquired and four were green field. The company sells its electricity to local power grids, which are mandated by the government to buy from small hydro plants for fixed tariffs.
China Hydroelectric posted revenues of $85.4 million in 2012, up 56% year-on-year, which saw its net loss narrow to $1.1 million from $55.3 million. The company had a working capital deficiency of approximately $81 million, raising substantial doubts as to its ability to continue as a going concern.
China Hydroelectric said in its 2012 annual report that efforts were being made to cut costs and secure additional financing.
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