CITIC oils Stackpole’s China wheels

Variable displacement pumps generate a 2% fuel saving over the life of a vehicle, resulting in reduced carbon dioxide emissions. Europe has already bought into the idea, with nearly all new cars fitted out with the pumps, while in the US it's a 50-50 split between fixed and variable.

In China, only 20% of new cars have variable pumps. Increased adoption is likely to be one of numerous measures employed by the government as it seeks to reduce the amount of carbon produced per unit of economic output by about 40% on 2005 levels within seven years.

This was part of the rationale for Crestview Partners and CITIC Capital Partners' acquisition of Canada-based Stackpole International last week. "We expect to see significant growth in the pumps business during our holding period, says Boon Chew, managing director at CITIC. "The China element isn't as large as it should be today and not as large as we expect it to be in five years."

This is the 13th investment from CITIC's international funds - it is now on the third vehicle, which closed in 2011 and is 30% deployed - and the strategy follows that of its forbears: identify a Western company that is underachieving or underpenetrated in China and help realize the potential.

Stackpole is being acquired from Sterling Group and Current Capital for $512 million including debt. The two US PE firms carved out the business from Gates Corporation in 2011, after Gates' parent - UK manufacturer Tomkins - was bought by Onex Corp. and Canada Pension Plan Investment Board.

There are two business lines: variable displacement oil pumps and powdered metals, which are also used in the auto industry to manufacture lightweight components for fuel-efficient vehicles. The latter is already well established in China through a joint venture with Halle Group of Korea.

While Crestview addresses the North America and European markets that account for the bulk of Stackpole's revenues, CITIC will help the company expand operations in China on the pumps side, utilizing its local resources.

It is something CITIC has done before and expects to do again. "With any North American industrial business there is a good chance that they have a decent China component," he explains. "The key change for us was the emergence of China as an end market for businesses across multiple sectors. There are many more opportunities today, compared to 2004 when we first starting doing this."

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• Topics
• Buyouts
• North America
• Greater China
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• CITIC Capital Partners
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