Ascendent supports buyout of HK-listed China Automation

According to a filing, a consortium comprising Ascendent and Ruiguo Xuan acquired a 100% interest in Consen Group, which holds a 44.62% stake in industrial components manufacturer China Automation. Xuan already owns a majority interest in Consen and he rolled over this holding - worth HK$257.7 million - into the acquisition vehicle. The remaining HK$291.8 million was used to acquire positions in Consen held by three other shareholders.

Ascendent and Xuan have now submitted an offer for the 567.3 million shares they don't already own. They are willing to pay HK$1.20 per share in cash - a premium to the June 23 closing price of HK$1.08 - for a total of HK$680.8 million. The total could reach as high as HK$789.7 million if the offer is accepted in full and all share options are exercised.

The private equity firm is supporting the two-part deal through a $99 million loan facility to the acquisition vehicle.

China Automation is the largest domestic provider of safety and critical control systems, the largest manufacturer of control valves for the petrochemical industry, and a supplier of traction systems and power supply and converting-related equipment to the railway industry. Its primary products for petrochemicals are emergency shutdown devices, fire and gas systems, turbine and compressor controls, and automatic control valves.

Founded in 1999, the company claimed to have a 72% share of the safety and critical control market for the petrochemical industry in 2007, having delivered approximately 3,700 units since inception.

China Automation reported revenue of RMB1.64 billion for the 12 months ended December 2015, down from RMB1.92 billion the previous year. The company also moved from a net profit of RMB46.7 million to a net loss of RMB146.3 million due to weaker demand from the petrochemical and coal chemical industries in the face of a slowing domestic economy and declining oil prices.

Ascendent is participating in the deal through its second fund, which closed last year at the hard cap of $600 million. The firm has previous experience in the high-end components space, exiting Nano Resources - which supplies parts for high-speed trains - earlier this year with a 5x return.

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• Topics
• Greater China
• Industrials
• Buyouts
• Ascendent Capital
• manufacturing