Morgan Stanley PE Asia agrees two China take-privates
Two privatizations US-listed Chinese companies backed by Morgan Stanley Private Equity Asia (MSPEA) have won board approval. Noah Education Holdings and Sino Gas International Holdings are now a shareholder vote away from de-listing.
A consortium comprising MSPEA, existing shareholder Baring Private Equity Asia and management team members including the chairman and CEO and the president and COO, will buy all outstanding American Depository Shares (ADS) for $2.25 apiece, a 23% premium to the December 23 closing price. It values the company at approximately $107.4 million.
The consortium's initial bid, submitted on December 24, was for $2.80 per share. At this point Baring Asia - which originally invested $15 million for a 21.84% stake in Noah in 2004 and made a partial exit to Lehman Brothers and UMC Capital ahead of the firm's 2007 IPO - was not participating in the deal.
The consortium controls 68% of the company. It will fund the transaction through the rollover of existing shares and an equity commitment from MSPEA.
Founded in 2004, Noah operates in three areas: kindergarten and pre-school education, primary and secondary schools, and supplemental education, specifically English-language training for 3-12 year-olds. The company has a network of 48 kindergartens, five primary and secondary schools, and 10 supplemental education centers.
Noah posted a net profit of RMB22.8 million in 2013, following substantial losses in each of the two previous years. Revenue came to RMB211.8 million, up from RMB163 million in 2012.
The Sino Gas board has accepted a bid of $1.30 per share, valuing the entire company at approximately $74.9 million. The original bid submitted in December by MSPEA and the company's chairman and CEO, was for $0.50 per share.
The transaction will be financed through an equity commitment of $28.96 million from MSPEA, an equity commitment of $37.45 million from Hong Kong-listed gas service operator Zhongyu Gas Holdings, and rollover equity contributed by the chairman and CEO. He owns 11.3% of the company.
Sino Gas owns and operates natural gas distribution systems in 34 small and medium-size cities in China, serving close to 300,000 residential customers. It has approximately 2,039 kilometers of pipeline that delivers 150,000 cubic meters of natural gas each day. The company posted revenues of $50.4 million in 2012, up 20.9% year-on-year, while net income fell 22.1% to $6.4 million.
Twelve PE-backed privatizations of US-listed Chinese companies have been completed since August 2011, including a MSPEA-backed take-private of Feihe International. At least 15 more transactions are still in process.
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